BUILDING WEALTH #4 - What to Look for in a Company (Before You Invest)

You Wouldn’t Trust a Rookie Who’s All Talk and No Skills.

So Why Trust a Stock That Looks Flashy But Has No Fundamentals?

When you invest in a company, you’re not buying a ticker or a logo, you’re buying a piece of a real business.

And if you wouldn’t want to own and operate that business in real life…

You probably shouldn’t own the stock either.

At Fireground Financial, we believe in value investing - buying great companies at fair prices, holding them long-term, and letting your money do the heavy lifting.

But before we ever buy, we run through a checklist. A firefighter-friendly framework that filters out the hype and finds companies worth owning.

Let’s break it down.

The 7 Things to Look for Before You Buy a Company

1. Do You Understand What the Company Does?

If you can’t explain it in 30 seconds, don’t invest in it.

This is the most basic and most ignored rule of investing.

We call it the "fireground test":
Could you explain this business to a fellow firefighter at the kitchen table without sounding like you’re reading from a finance textbook?

Good examples:

• Home Depot: sells tools and materials for home improvement
• Apple: makes phones, laptops, and software people love
• Waste Management: gets paid to pick up and process trash

If it takes three YouTube videos and a Reddit thread to figure out what the company actually does, pass.

2. Is the Company Profitable?

If they aren’t making money, they shouldn’t be taking yours as an investment.

Profit = revenue minus expenses.
It’s the simplest sign of a healthy business.

• Check if they’ve had steady profits over the last 5 years
• Use free tools like Yahoo Finance, Google Finance, or Simply Wall St
• Look for consistency, not one lucky year followed by losses

Even great companies have rough patches, but if a company has never turned a profit? You're not investing. You're gambling.

3. Is Revenue Growing Over Time?

A business that’s not growing is slowly dying.

Growth shows demand, relevance, and operational strength.

Here’s what to look for:

• Is revenue higher today than it was 3–5 years ago?
• Are they expanding into new markets or products?
• Does the growth seem sustainable or just a one-time spike?

Slow and steady growth is better than flashy but inconsistent spikes.

Think of it like a firefighter probie, the one who quietly improves every shift beats the loud one who burns out fast.

4. Is the Company Financially Healthy (a.k.a. Not Drowning in Debt)?

You want companies that own assets, not just obligations — just like we teach individuals.

Check:

• Is their debt-to-equity ratio reasonable? (Lower is better)
• Are they generating positive cash flow?
• Can they cover their interest payments comfortably?

If a company is buried in debt and borrowing to survive, you’re sitting on a time bomb, not a business.

5. Does It Have a Competitive Advantage (Moat)?

A "moat" is what protects a company from its competitors, the reason customers keep coming back.

Moats can be:

• Strong brand (Apple, Nike)
• Cost advantage (Costco, Walmart)
• Patents or technology (Pfizer, Nvidia)
• Network effect (Meta, Visa)

Ask:

What keeps other companies from copying this business tomorrow?

If you can’t find an answer, it’s probably not built to last.

6. Is It Led by Competent, Honest Leadership?

You’re investing in people as much as products.

Look at:

• CEO history: Are they respected? Long-term thinkers?
• Past scandals or shady behavior?
• Do they own shares themselves (a good sign)?
• Are they buying stock (confidence) or selling it constantly (red flag)?

If the people in charge don’t believe in the company, why should you?

7. Is the Stock Price Reasonable?

Even the best business can be a bad investment if you overpay.

A basic tip:

• Compare the stock’s Price-to-Earnings (P/E) ratio to its competitors
• Look at historical averages. Is it overpriced compared to its own past?
• Use tools like Simply Wall St to see if the stock is “fairly valued”

You want to buy great companies at good prices, not pay top dollar for a name everyone’s chasing.

Value investing means buying $1 for $0.70, not buying $1 for $1.50 just because everyone’s hyped.

Fireground Fund in Action: How We Apply This

Every stock we add to the Fireground Fund runs through this exact checklist:

Do we understand it?
Is it profitable?
Is it growing steadily?
Is the balance sheet clean?
Does it have a moat?
Is leadership solid?
Can we buy it below value?

If it checks 5–6 of those boxes, it goes on our watchlist.
If it checks 7 and the price is right - we buy.

Our fund isn’t built on speculation. It’s built on strategy.

Recap: Your Firefighter-Friendly Stock Checklist