As investors, we need to understand how our companies truly make their money. A neat trick developed for just that purpose — the DuPont formula — can help us do so.
So in this series, we let the DuPont do the work. Let's see what the formula can tell us about Career Education (Nasdaq: CECO ) and a few of its peers.
The DuPont formula can give you a better grasp on exactly where your company is producing its profit, and where it might have a competitive advantage. Named after the company where it was pioneered, the formula breaks down return on equity into three components:
Generally, the higher these numbers, the better. That said, too much debt can sink a company, so beware of companies with very high leverage ratios.
So what does DuPont say about these four companies?
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