Some examples of how I go about valuing companies from fundamentals, eg:
Earnings
ROE
+P/E ratios
+Debt-equity
+EPS - earnings per share
+ROC/ROIC - return on invested capital vs Weighted Average Cost of Capital (WACC)
(ROIC>WACC)
Inghams Group
ASX: ING
....
The earnings stability is all over the place. So it will be difficult to predict what the earnings will be in 5 to 10 years time.
Also look at the debt to equity.
The gearing is about 500%
As of the latest reports (28/6/26), Inghams Group (ASX: ING) carries a total debt-to-equity ratio ranging between 5.43 and 5.85, reflecting high financial leverage used to boost returns. This signifies that the company relies heavily on debt relative to shareholder equity, introducing elevated financial risk.
Key Leverage Metrics
- Total Debt to Equity: ~543% to 585%
- Net Debt to Equity: ~5.57
- Total Debt: Approx. 1.49 billion
- Shareholders Equity: Approx. 255 - 277 million
Why It Matters
A debt-to-equity ratio of over 5.0 means the company has more than five times as much debt as equity. Inghams utilizes this substantial leverage to drive a strong Return on Equity (ROE). However, this strategy magnifies both profits and risks during economic or sector downturns.
So though PE looks good and earnings are positive, this probably isnt a stock I'd buy.
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ROIC is 7.24% - not great. ...below 10%
WACC = 4.39%
the reason for this is the debt on their books.
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ROE, earnings for Northern star (ASX: NST)
NST being a gold miner has earnings all over the shop.
It's very difficult to predict earnings over a 5 year period
Future ROE is also hard to predict.
Everything depends on the current gold price.
Debt - equity ratio
Northern Star Resources Ltd (ASX: NST) currently (june 2026) has a total debt-to-equity ratio of approximately 11.77%. This indicates that the company uses a very conservative amount of debt to finance its operations and maintains a strong, low-risk balance sheet relative to its shareholder equity.
A quick breakdown of the financial metrics includes:
- Total Debt/Equity: 11.77%
- Net Debt/Equity: ~0.06%
- Interest Coverage Ratio: ~67.9x
So though debt levels are low and the company looks well run its very hard to look into the future and predict profit in 5 or 10 years time.
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Metcash - ASX MTS
Earnings & ROE
It does have good earnings stability ... not as great as some companies.
... but faster than inflation
ROE is good @ 17%.
Anything that is constantly above 10% ... gets a tick
Debt to equity
Metcash Limited (ASX: MTS) currently has a total debt-to-equity ratio of approximately 110% to 112%. While the company's net debt-to-equity sits around 1.07x, its financial position features a relatively tight current ratio of 1.07.
Key Balance Sheet Metrics
- Total Debt to Equity: ~110.36%
- Net Debt to Equity: 1.07x
- Debt Leverage Ratio: 1.0x (reported at the low end of the company's target range)
Related Financial Health Indicators
- Current Ratio: 1.07
- Interest Coverage: ~4.12x
- Return on Equity (TTM): 16.72
..
ROIC ... return on capital is not great. ...below 10%
the reason for this is the debt on their books.
Metcash Limited (ASX: MTS) generates a Return on Invested Capital (ROIC) of approximately 9.57%, with its Return on Capital Employed (ROCE) sitting in the 13% to 14% range. Additionally, the company posts a strong Return on Equity (ROE) of roughly 16.72%.
EPS - earnings per share
.
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ASX BHP
ROE & Earnings
Very uneven earnings
Follows the commodity cycles
But it does have a very good stability for a mining company because its so large and diversified.
Probably the worlds best miner.
If you must own this make sure you buy it when its PE is in the range of 10 to 12
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ASX: XRO
Xero is a accounting software company
..
The earnings have been growing unevenly.
there was a sudden drop in revenue in 2026
Revenue looks great, however SAAS is under threat from AI and you can see the drop in ROE in 2026
Is someone coming in to eat their lunch?
XERO needs to innovate or buy out the competition
stats
ROIC vs WACC
3.32% vs 7.44%
Not a good ratio ... the return on capital is less then their spending on capital.
Ie they burn more money than they generate. So to survive they must innovate!
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AX1
Accent
ROE, earnings
.ROE just above 10
Dropping over the last few years
Look at earnings vs revenue
Revenue flat the last 3 years. Earnings have been dropping over the last 3 years
.
price dropping over last 3 years
stats
https://stockanalysis.com/quote/asx/ax1/statistics/
ROIC vs WACC
5.83% vs 6.16
Roic should be greater.... the reason for this is the debt on their books.
Not a good ratio ... the return on capital is less then their cost of capital.
Frasers of the UK have a takeover offer about 60c
Debt to equity
.....
The debt-to-equity (D/E) ratio for Accent Group Ltd (ASX: AX1) is currently (june 2026) around 1.31 (or 130.8%). This indicates that the company uses roughly $1.31 of debt for every $1.00 of equity, which is slightly above its 10-year median.
A closer look at the financial metrics provides additional context:
- Net Debt to Equity: When factoring in the company's cash reserves, the net D/E ratio drops to approximately 1.10.
- Interest Coverage: Accent Group's EBIT comfortably covers its interest expenses by a factor of roughly 3 to 6x depending on the reported period.
- Current Ratio: The ratio stands at 1.13, reflecting that short-term assets slightly exceed short-term obligations
Its not a bad company, but there are better shares out there because of its debt levels.
Tough retail conditions ... hoping for a turnaround story.
....
COLES - COL
Very defensive stock
ROE... dropping a bit , earnings flatish etc
Supermarkets are a low margin business... margins are being squeezed
revenue growing steadily
still the share price is near all time highs
stats
ROIC = (Operating Income * (1 - Tax Rate)) / Average Invested Capital = 9.23%
Weighted Average Cost of Capital (WACC) = 5.22%
Weighted Average Cost of Capital (%)
The Weighted Average Cost of Capital (WACC) represents the average rate a company is expected to pay to finance its assets. It's calculated using the CAPM model for cost of equity (Risk-Free Rate + Beta × Equity Risk Premium) and the after-tax cost of debt, weighted by the company's capital structure. WACC is commonly used as a discount rate in DCF valuations. A lower WACC indicates cheaper financing and potentially higher valuations.
....
Thus Debt should be OK
Coles Group Limited (ASX: COL) currently has a debt-to-equity ratio of approximately 272%. While this indicates the company holds more total debt than shareholder equity, the leverage is supported by a stable cash flow and strong interest coverage.
Key Balance Sheet Metrics
- Total Debt / Equity: ~272.26%
- Net Debt / Equity: ~46.9% to ~257% (depending on the inclusion of lease liabilities)
- Total Debt: ~$10.57 Billion
- Total Equity: ~$3.88 Billion
Financial Health Check
- Debt Coverage: The company generates strong operating cash flow, providing comfortable coverage for its debt obligations.
- Interest Coverage: Interest payments are well covered by Earnings Before Interest and Tax (EBIT) at approximately 3.6x.
- Return on Equity (ROE): High, typically tracking over 26%
PE = 31
Why buy a company with this PE that is only just keeping up with inflation.
very slowly growing
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CSL
...earnings up in 2025, roe
revenue still going up in 2025
stats
ROIC = 11.52%
WACC = 4.43%
Very low debt
CSL Limited's (ASX: CSL) total debt-to-equity ratio sits at approximately 54.4%. This indicates that CSL maintains a moderate and sustainable level of leverage, comfortably balancing its debt obligations against shareholder equity.
Financial health metrics for CSL are summarized below:
- Total Debt to Equity: ~54.4%
- Long-Term Debt to Equity: ~43.9%
- Net Debt to Equity: ~49.0%
- Current Ratio: 2.57x, indicating strong short-term liquidity
- Interest Coverage Ratio: ~10x, demonstrating ample buffer to cover interest payments from operating profits
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