As we head into the 4C season I thought it might help newbies to know what I look for when a 4C lands on the ASX. First let me say this is not the only things I look at and none of these rules are set in stone. You need to make a judgment not only on the quality of the 4C..

but whether the 4C is already reflected in the company’s share price. Ok grab a tequila, lime and salt and let’s go.
1.. The first and most important line for me is revenue. I’m looking for a minimum 20% increase in revenue on previous quarter. Not corresponding period last year.

2. Cashflow positive, it’s a cashflow statement so we want more coming in than going out but serious growth in revenue is more important. But and it’s a big but ! Dont obsess over a company being cashflow positive. If a company is quickly grabbing market share its wise they spend

to grab as much of the market that it can. Important note: You’ll often find companies reduce expenses when sales growth declines to try to make the cashflow bottom line look better but if sales are slowing in a small cap the opportunity is not what management claims.

3. Cash position. The more cash they have in the bank the better. Once they have less than 4 quarters of cash left the market starts to discount the price waiting for a cap raise. Again rapid revenue growth can override this. Remember it’s all about grabbing new customers and

holding onto them!
4. Corporate costs. This tells me if the management is seriously trying to build a business or they’re looking after themselves.
5. Margins. This is my final point and it’s also the kicker. Is more cash flowing to the bottom line as each additional dollar of

revenue is coming in ? or are they paying too much for the revenue/customer growth and they might never actually turn cashflow positive? The end. Good Luck and may all your 4C’s be huge !