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MARKETS & MACRO

Sector Analysis

A bank is not valued like a software company, and that is the whole premise here.

This category covers the metrics that matter inside specific industries, across the explainers on bank net interest margin, efficiency ratios, credit provisioning, CET1 capital, Basel III, and stress tests, plus insurance combined ratios, loss ratios, and float.

Investing With Purpose builds the sector-specific lenses that generic multiples miss, so you can judge a company on the numbers its own industry actually runs on.

Each sector rewards a different set of figures and hides a different set of red flags.

Use it to analyze banks, insurers, and other sectors with the right framework rather than one-size-fits-all ratios.

Sector Analysis
Bank Net Interest Margin: How Banks Earn Their Spread

Net interest margin tells you how much a bank earns on each dollar of earning assets after paying its depositors and…

Intermediate
Sector Analysis
Bank Efficiency Ratio: Cost Control in One Number

The efficiency ratio tells you how much a bank spends to generate one dollar of revenue. It is the cleanest single…

Intermediate
Sector Analysis
Bank Credit Provisioning: CECL and Loan Loss Reserves

Credit provisioning is how a bank sets aside money today for loan losses it expects in the future. The accounting…

Intermediate
Sector Analysis
Bank CET1 Capital Ratio: How Bank Capital Works

Capital ratios measure how much of a bank's balance sheet is funded by its own shareholders rather than by depositors…

Intermediate
Sector Analysis
CCAR DFAST Stress Test: How the Fed Tests Banks

Stress tests are the Federal Reserve's annual exam for the largest US banks. They set the size of each bank's capital…

Intermediate
Sector Analysis
Bank ROE DuPont Decomposition: What Drives Returns

Return on equity tells you how profitably a bank uses shareholder capital. DuPont decomposition breaks that headline…

Intermediate
Sector Analysis
Insurance Combined Ratio: The One-Number Profitability Test

The combined ratio is the single most important profitability metric for a property and casualty (P&C) insurer. It…

Intermediate
Sector Analysis
Insurance Loss Ratio Expense Ratio: The Two Components

Loss ratio and expense ratio are the two halves of the combined ratio. They answer different questions about an…

Intermediate
Sector Analysis
Insurance Float: Buffett's Free Leverage Explained

Insurance float is money an insurer has collected in premiums but not yet paid out in claims. The insurer invests that…

Intermediate
Sector Analysis
Insurance Loss Reserves: Estimating Future Claims

Reserves are the liabilities an insurer books today for claims it will pay in the future. Setting them accurately is…

Intermediate
Sector Analysis
Solvency II RBC Insurance Capital: US and EU Frameworks

Insurance regulators in the United States and Europe run two of the most developed risk-based capital regimes in…

Intermediate
Sector Analysis
Annual Recurring Revenue SaaS: ARR and MRR Explained

Annual Recurring Revenue (ARR) and Monthly Recurring Revenue (MRR) are the two headline numbers every SaaS company…

Intermediate
Sector Analysis
Net Revenue Retention SaaS: The Durable Growth Metric

Net Revenue Retention (NRR), also called Net Dollar Retention (NDR), measures how much the existing customer base grows…

Intermediate
Sector Analysis
LTV CAC Ratio SaaS: Unit Economics That Matter

Lifetime Value (LTV) and Customer Acquisition Cost (CAC) are the two sides of SaaS unit economics. LTV is how much…

Intermediate
Sector Analysis
Rule of 40 SaaS: Balancing Growth and Profitability

The Rule of 40 is a shorthand for whether a SaaS company is balancing growth and profitability well enough to create…

Intermediate
Sector Analysis
SaaS Magic Number: Measuring Sales and Marketing Efficiency

The SaaS Magic Number is a one-quarter snapshot of sales and marketing efficiency. It asks a simple question: for every…

Intermediate
Sector Analysis
Gross Revenue Retention SaaS: What the Bucket Holds

Gross Revenue Retention (GRR) measures how much of your existing customer revenue base you keep over a year, ignoring…

Intermediate
Sector Analysis
Biotech Clinical Trial Phases: I, II, III Explained

Clinical trials are the staged experiments that decide whether a drug candidate becomes an approved medicine. Biotech…

Intermediate
Sector Analysis
FDA Approval Process: Biotech Catalyst Timeline

The FDA approval process is the series of regulatory steps a drug must clear to be sold in the United States. For…

Intermediate
Sector Analysis
Pharmaceutical Patent Cliff: Revenue After Exclusivity Ends

A patent cliff is the sharp drop in branded drug revenue that follows loss of exclusivity, when generic or biosimilar…

Intermediate
Sector Analysis
Biotech Probability of Success: Risk-Adjusted Drug Valuation

Probability of Success (PoS) is the estimated likelihood that a drug candidate will be approved, given its current…

Intermediate
Sector Analysis
Reserve Life Index: How Long Oil and Gas Reserves Last

The reserve life index, more commonly called the reserves-to-production (R/P) ratio, tells you how many years a company…

Intermediate
Sector Analysis
Shale Breakeven Price: New-Well, Legacy, and Fiscal

A breakeven price is the oil or gas price at which a new well, a whole field, or an entire country's budget just clears…

Intermediate
Sector Analysis
Decline Curve Analysis: How Oil Wells Lose Production

A decline curve plots how fast a well's production falls over time. It is the foundation of every reserves estimate,…

Intermediate
Sector Analysis
Oil Gas NAV 2P Reserves: E&P Valuation Framework

Net asset value (NAV) for an oil and gas company is the present value of the after-tax cash flows its reserves are…

Intermediate
Sector Analysis
Utility Rate Base: The Engine of Regulated Earnings Growth

Rate base is the pool of invested capital that a regulated utility is allowed to earn a return on. It is the single…

Intermediate
Sector Analysis
Utility Authorized ROE: Setting the Regulated Return

The authorized return on equity, or ROE allowance, is the percentage return a regulator permits an investor-owned…

Intermediate
Sector Analysis
Utility Regulatory Asset: Deferred Costs in Rate Regulation

A regulatory asset is a deferred cost that a regulator has authorized a utility to recover from customers through…

Intermediate
Sector Analysis
REIT Property Types: 14 Sectors and What Drives Each

Not all REITs own the same kind of real estate, and the differences matter. A cell tower REIT, an apartment REIT, and a…

Intermediate
Sector Analysis
Same-Store NOI: The Organic REIT Performance Measure

Same-store net operating income growth is the single most important number for judging whether a REIT's existing…

Intermediate
Sector Analysis
LTV DSCR Real Estate: How Lenders Size CRE Loans

Loan-to-value (LTV) and debt service coverage ratio (DSCR) are the two ratios every commercial real estate lender looks…

Intermediate
Sector Analysis
Triple Net Lease NNN: How Landlord Obligations Get Shifted

A triple-net lease shifts three expense categories, property taxes, building insurance, and maintenance, from landlord…

Intermediate
Sector Analysis
1031 Exchange Real Estate: Defer Capital Gains on Sale

A 1031 exchange lets real estate investors sell one property and buy another without paying capital gains tax today, as…

Intermediate
Sector Analysis
Opportunity Zones: Defer and Exclude Capital Gains Tax

Opportunity Zones are economically distressed census tracts where investors can roll capital gains into a Qualified…

Intermediate
Sector Analysis
Same Store Sales Retail: Reading Comps the Right Way

Same-store sales, also called comparable sales or "comps," measure revenue growth at locations that have been open long…

Intermediate
Sector Analysis
Inventory Turnover Ratio Retail: Turns, DIO, and Markdown Risk

Inventory turnover measures how many times a retailer sells through and replaces its stock during a period. For a…

Intermediate
Sector Analysis
RevPAR ADR Hotel Metric: How Hospitality Performance Is Measured

RevPAR and ADR are the two headline metrics of the hotel industry. Together they tell you how full a hotel is, how much…

Intermediate
Sector Analysis
CASM RASM Airline Metric: Unit Economics That Drive Profits

CASM and RASM are the unit-economics metrics that decide whether an airline makes money. Every other airline ratio,…

Intermediate
Sector Analysis
Airline Load Factor: Capacity Utilization and Its Limits

Load factor is the percentage of an airline's available seats that actually had paying passengers in them. It is the…

Intermediate
Sector Analysis
Railroad Operating Ratio: Efficiency in One Number

Operating ratio is the single most-watched profitability metric in the freight rail industry. It is a simple…

Intermediate
Sector Analysis
Baltic Dry Index Shipping: Rates, Vessels, and What Moves Them

The Baltic Dry Index (BDI) tracks the cost of moving raw materials by sea on the largest dry-bulk vessels. Because…

Intermediate
Sector Analysis
Auto SAAR Vehicle Sales: Reading the Seasonally Adjusted Rate

Auto SAAR is the standard measure for how many new vehicles are being sold in the US at a given moment, adjusted so you…

Intermediate
Sector Analysis
Telecom ARPU Churn: Revenue Per User and Retention Economics

ARPU and churn are the two levers that drive telecom economics. One measures what each customer is worth per period;…

Intermediate
Sector Analysis
Streaming Subscription Advertising Revenue: The Two Revenue Models

Media businesses earn revenue from two very different pockets: the customer who pays a subscription and the advertiser…

Intermediate
Sector Analysis
Retail Shrinkage Shrink Rate: The Direct Hit to Gross Profit

Shrinkage, or "shrink," is the inventory a retailer records as on hand but cannot find when it physically counts. It is…

Intermediate
Sector Analysis
Hotel Occupancy Rate: The Foundation of Lodging Performance

Occupancy rate is the simplest hotel metric to describe and one of the most consequential to manage. It tells you what…

Intermediate
Sector Analysis
AI Capex Cycle: The Largest Tech Build-Out in History

The spending cycle triggered by generative AI is the largest capital expenditure boom in technology history. Four…

Intermediate
Sector Analysis
Basel III Framework: Bank Capital and Liquidity Rules

Basel III is the global rulebook that governs how much capital banks must hold, how liquid they must be, and how much…

Advanced
Sector Analysis
Reinsurance Basics: How Insurers Transfer Catastrophe Risk

Reinsurance is insurance for insurance companies. When a primary insurer wants to limit its exposure to a single large…

Advanced
Sector Analysis
Catastrophe Bonds: How Cat Bonds Move Disaster Risk to Markets

Catastrophe bonds transfer natural-disaster risk from insurers and reinsurers to capital-market investors. In exchange…

Advanced
Sector Analysis
Insurance-Linked Securities: Cat Bonds, Sidecars, and ILWs

Insurance-linked securities are financial instruments whose performance depends on insurance events rather than on…

Advanced
Sector Analysis
Longevity Swap: How Pension Plans Hedge Life Expectancy Risk

A longevity swap is a contract that lets a pension plan or insurer lock in the cost of paying retirees for life. The…

Advanced
Sector Analysis
Airline RPM ASM Load Factor: Five Metrics for Every Investor

Airlines run on tiny margins, so the industry measures itself per seat and per mile. Five metrics tell you almost…

Advanced
Sector Analysis
Auto OEM Unit Economics: Volume, Mix, Price, and Margin

Auto manufacturers earn or lose money one vehicle at a time, and the income statement is essentially the sum of…

Advanced
Sector Analysis
Retail Comparable Sales: Traffic, Ticket, and What They Mean

Comparable sales (also called same-store sales or comps) measure revenue change from stores that have been open long…

Advanced
Sector Analysis
Hotel RevPAR ADR: Decomposing the Key Lodging Metrics

The hotel industry collapses its operating performance into a single per-room metric: revenue per available room, or…

Advanced
Sector Analysis
Software ARR NRR Net Revenue Retention: The SaaS Growth Engine

In subscription software, two numbers explain almost the entire earnings model: annual recurring revenue (ARR) and net…

Advanced
Sector Analysis
Semiconductor Capex Cycle: WFE, Inventory Whips, and Timing

Semiconductor companies live and die by a capital cycle that runs about three to four years from peak to peak. Capex as…

Advanced
Sector Analysis
Biotech Phase I II III Probability: Success Rates and rNPV

A drug entering Phase I has roughly a 1-in-10 chance of reaching FDA approval. That single statistic, well documented…

Advanced
Sector Analysis
Pharma Patent Cliff: LOE Erosion Curves and Pipeline Replacement

When a branded drug loses patent protection, generic or biosimilar competitors enter and revenue typically falls…

Advanced
Sector Analysis
Defense Contractor Backlog: Funded, Unfunded, and Book-to-Bill

Defense primes report a backlog number that often exceeds annual revenue by a factor of two to three. Reading that…

Advanced
Sector Analysis
Apparel Inventory Turnover: Turns, Markdowns, and Gross Margin

In apparel, inventory is fashion before it is balance-sheet. A jacket that does not sell at full price loses value…

Advanced