Business models and competitive moats

A P/E ratio compares price to profit, but it never asks whether that profit is safe from competitors. That question belongs to two ideas covered together here. A business model tells you how a company turns what it does into revenue. A moat tells you whether a competitor can take that revenue away. Together they explain something a ratio alone never can: why a company's margins might hold steady for years, or shrink within a few.

What a business model tells you

A business model is simply how a company gets paid for what it does. Two questions matter most.

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