a.k.a. PCA Analysis

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As I tried to understand the investment thesis for debt/equity investing, I realized that the key was understanding the competitive positioning of the company or more specifically its competitive advantage relative to the industry participants. To help me better understand the sectors, I developed this tool using US public equity data for each of the years from 2004 to 2008, but I reckon that underlying methodology/philosophy is as applicable to any investment.

The difference in profitability (or variation in EBITDA margin) is explained by the value captured due to "barriers-to-entry" for the industry/sector AND the "competitive advantage" possessed at the company level. The assumption is that an aggregation of both these quantities at sector level and industry level illustrate the "barriers-to-entry" that any new entrant has to compete with.


If you want to learn a little bit more about the methodology - here is some information.

How To Use The Clickable Charts