Top 3 Analyst Mistakes You Must Avoid Today

A simple breakdown of the errors beginners repeat—and the practical fixes that make you sharper.

Hello and welcome back to The Finance Lens!

I still remember the first time I opened an annual report. I made coffee, felt like a mini–Warren Buffett, and then… froze.

The numbers looked like they were written in a secret language.
If you have ever felt that way, trust me, you are in good company.

Most new analysts make the same mistakes, and honestly, I have made them all myself. So consider this more like a friendly clinic visit, not a lecture.

Let’s walk through the 3 big ones.

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Mistake 1: Getting Too Excited About Growth (and forgetting margins exist)

A young analyst once messaged me saying, “Ma’am, this company is growing 40% every year. I am buying it today.”

And I get it, growth is flashy. It is like a shiny car. But when we dug a little deeper, margins were falling quarter after quarter.

Basically, the company was running faster but earning less with every step. It reminded me of those days when I used to work extra hours but somehow ended up with less energy and the same paycheck.

Growth without improving (or at least stable) margins is usually noise — unless there is a very clear reinvestment story

Fix Box

• Always look at revenue growth and margins together.

• If margins keep dropping, ask: Why is the company losing profitability while “growing”?

• Continuous margin erosion = something underneath is not okay.

Mistake 2: Believing Revenue Headlines Without Checking Cash Flow

Let me confess something embarrassing: In my early days, I once recommended a company purely because “Revenue up 25%!”

Two months later, I realised receivables had exploded like crazy. I felt like someone who brags about earning ₹1 lakh a month… but then asks friends for Uber money.

A company can sell a lot on paper, but if the cash is not coming in, honestly, it does not mean much.

Fix Box

• Check cash flow first, not after.

• Look at:

  • Receivables vs sales

  • CFO vs net profit

• If the company’s cash does not match its profits, something is fishy.

Mistake 3: Comparing Totally Different Types of Businesses

Once, during a call, a junior analyst said, “Steel stock ROE is higher than this FMCG stock. So it is better, right?”

I had to literally stop myself from facepalming.

Steel and FMCG operate in different universes. One is asset-heavy, one is asset-light.
Comparing them is like comparing a guy who lifts trucks to a guy who runs marathons. Both are strong — just in totally different ways.

Fix Box

• Group companies by capital intensity before comparing.

• Use:

  • ROCE for capital-heavy sectors

  • ROE for asset-light ones

• And always check debt levels and asset turnover.

Try This (5–10 Minutes)

Pick one company you follow.

Now do ONE simple check:

Are receivables rising along with sales?

If yes → pause. Something may be off.
If no → more reliable growth.

This tiny habit alone saved me from at least 3 bad investment calls.

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Drop your number. Let’s learn together.

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