 With the recent stock price falling more than 20% from its all-time high, and some of the tech stock dropping 50% to even 80%, the plenty and Shopify. Some investors are wondering exactly what is going on in the stock market. Are these tech companies supposed to be good companies to invest in the first place since so many of the friends, colleagues and even auntie uncles have been talking about them? If indeed it's a great company, why is the stock price dropping like crazy? If your portfolio is in red right now, and if you're wondering exactly how can you start investing safely like what Warren Buffett has been doing, and how can you use value investing to start investing in the stock market in a very wise manner instead of depending on hearsay, then keep on watching. Subscribe button as well as the notification bell so that you will not miss out any of my future investment updates. And early thumbs up is also appreciated because I will tell YouTube algorithm that you find this video helpful and will actually help to push up to more people to inspire them to start investing safely. In this video, I'm going to share with you the 5 key metrics that Warren Buffett himself looks at before investing in any single company. Before that, I want to give a special thanks to Moomoo Singapore for sponsoring this video. Now let's get started. When it comes to value investing, Warren Buffett says it's very simple. It all boils down to buying a good company at a good price. So firstly, let's understand what makes a company great. The first key metric that Warren Buffett looks at is growing earnings per share. Earnings per share serve as an indicator of the company's profitability, which means it's a company making money or actually losing money. It is calculated by dividing the company profit by the number of shares outstanding. Warren Buffett always advocates in investing businesses that are predictable and consistent earning is a form of predictability. For example, if you look at Apple, which is Warren Buffett's largest holding right now, it has very consistent earnings per share. Its EPS has been steadily growing over the years and if the business does well, the stock price will eventually follow. And that is why you can see that Apple's stock price has also been growing over 300% in the past five years together with the growing earnings per share. Number two, growing operating cash flow. Once you find a company with growing EPS, your research shouldn't just stop there. You also need to look at the company's operating cash flow. Because there are some companies that like to cook the book, which means they purposely make the income statement, which is a profit, looks super nice, super profitable, but actually in reality, they are losing money. Which means they're unable to produce any cash flow from their day-to-day operations. And we all know cash is king. It's the blood of the business. If the company is unable to generate cash flow, these business may eventually go into bankruptcy. Just like what happened to high flux back then, you can see that the revenue has been very stable and consistent. But if you dip dive into its cash flow statement, you can see that its operating cash flow has been consistently negative. So you must be wondering, what is operating cash flow? To simply put, it is a measure of the amount of cash that the business generate from its day-to-day operations. And in order to make sure that we are investing in a good company, we should look out for companies with positive operating cash flow and in fact, growing operating cash flow. You can see that for the past five years, Apple has been having positive and consistently growing operating cash flow. No wonder it is Warren Buffett's favorite company. Once you check the OCF, the next step is to see whether the company has a good net margin. As you can see, inflation is hitting all-time high and the Fed is actually increasing interest rates. What does that mean is we are likely to enter a recession. When that happens, people will start cutting spending and businesses with low profit margin will start to suffer. In order to survive, these businesses are forced to cut down their prices even further to attract customers. But this in return will reduce their margin even lower. And this vicious cycle will drive many businesses out of business. Which is exactly what happened when COVID-19 hit for the past two years. So many retail shops, restaurants, bars are forced to close because their margin just can't sustain a business anymore. So how is net margin being calculated? All to do is to use the net profit divided by the total revenue collected by this business. We want the net profit margin to be a minimum of 10% or even better, more than 20%. The net profit margin of Apple has been consistently above 20%, showcasing that this company has a lot of pricing power through strong branding. And Warren Buffett always loves to invest in businesses that people are willing to pay, even though it's expensive. And here comes Warren Buffett's one of favorite investing metrics, return on equity. ROE signifies how efficient the company is in generating profits for its shareholders. It is calculated as using net income divided by shareholders' equity. As we all know, shareholders' equity belongs to shareholders like you and me. So we want to make sure this company is indeed using our equity effectively and efficiently to generate more profits. In short, it helps investors to understand whether are they getting a good return from their investment. Just like other metrics, different industries have different benchmarks for ROE. But a general rule of thumb is, if you can find a business with above 15% ROE, it is indeed a rare find. As you can see from Apple, the ROE has been consistently above 15% for so many years. Just like what Warren Buffett said, you need to buy a good company at a good price. So once we understand this is a good company, now it's time to learn how to know whether is it a good price to buy it right now. There are so many valuation metrics out there that you can use. But right now, I'm going to show you one key valuation method that many professional people, including fund managers, are using to evaluate a stock. And that is PE ratio. The price-to-earnings ratio in short, PE ratio tells how much the market is willing to pay to buy this company. By dividing the stock price over the earnings per share of the company, it conveys how much the investor is willing to pay for every single dollar of the earnings. Right now, Apple has a PE ratio of 27 times. But exactly is 27 times cheap or expensive? How do we know? We need to compare with its sector average. And as you can see from the Moomoo app, the sector average is only 26 times. So if you buy Apple at this price, you're actually paying more compared to buying its peers. On the other hand, Meta Platform, which is Facebook, only has a PE ratio of 14 times as compared to its sector average of 20 times. That means it could potentially be a very good investing opportunity right now. So here are the 5 key metrics that you should start looking at before investing in any single company. Remember, value investing is a very powerful method that Warren Buffett has been using for years to compile his wealth. But this is a very deep topic and what I'm showing you right now in this video is just the tip of the iceberg. So I highly recommend you to read deeper into Warren Buffett's investing philosophy, which has true number of books, including Buffettology, written by my own personal mentor, Mary Buffett, who learned directly from the Buffett family so that you can truly understand the beauty of value investing. And if you know how to combine options with the power of value investing, that's how you can increase your return even further. If you also want to learn about options, my team and I are actually conducting a free options foundation class. All you have to do is to click on the link around this video and register for your spot. And if you want to get started in your investing journey and wondering which account to open, then do consider Moomoo, because it's a very established brokerage that allows you to invest in diversified markets, including US, Hong Kong, China, Singapore, and more. Most importantly, it's also regulated by MAS, Monetary Authority of Singapore. Right now, if you open your account via my link below and find $2,700 Singapore Dollars or more inside, you will even get free shares as a welcome gift, as well as my own private portfolio watchlist to help you get started in your investing journey. All you have to do is to fill out this google form and notify me once you sign up and funded your account, and I will send you my portfolio watchlist within a week. With that, happy investing, and I can't wait to see you in the next video, mata ne!