When you’re looking at a potential investment, it can be challenging to come up with a “base case” scenario. There’s so much information to consider, and all of the different variables interact with one another. To get a handle on this and to focus on the “big picture,” I like to use a method that I call “5-Component Investing.” As the title notes, I fixate on five major investing components for a business and security.

On the business side, I look at revenue growth and company-wide earnings growth, which are linked by the profit margin.

Transitioning from the business side to the shareholder side, you have earnings per share growth, which is a function of the change in the share count.

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