Picking the right tool for the job

Ratios are shortcuts for understanding value – sometimes they enlighten and sometimes they deceive. At Forager, we apply relevant ratios or mental models to a business in order to understand it better. Different tools for different companies must be used depending on the type of business we are researching. Like a tradesperson selecting the right tools, picking the correct ratio or model is a skill built through experience. Selecting the right tools can be a question of specialisation – many investors specialise in particular areas, but the successful ones stick to what they’re good at. In this featured insight, we talk through a simple example of which tools might be used when valuing a farm verses a medical practice.