Look to this business model when judging a company

May 16, 2008

Investment analysts often use the term "business model" when talking about companies. What does that encompass?

Investment analysts often use the term "business model" when talking about companies. What does that encompass?

The business model essentially details how the company intends to make (or already makes) substantial profits, how it will continue to grow and maintain those healthy profits over the long term, and how it will handle challenges from competitors. Strong companies consider each of these points carefully and develop clear and thoughtful plans in each area. So before investing in any company, it's wise to review its annual report and other literature for this information. If you can't find a detailed description of a company's business model or the model seems based on unreasonable assumptions, look for a better investment alternative.