My EGS-Model (Evaluating Growth Shares model)
My EGS-model is a tool for evaluating the companies behind growth shares. This is not a tool for picking this or that share, or evaluating the strength and/or potential of their product, but is an assessment of timespan of the investment, the kind of investment, and the risk involved.
I have two dimensions – product and finance. Product is the horizontal dimension and ranges from an idea to general market acceptance. The vertical dimension is finance. It ranges from send more money (need for further share issues) to breakeven. The blue arrows indicate where the company is heading at present, and their direction is solely based on my assessment.
The model is dynamic and companies move between the different boxes throughout their development. I imagine the most common direction on the product dimension is moving left to right. On the finance dimension however, it is possible to move up and down (frequently companies visit the square ‘send more money’ – even if they have market acceptance).
The colours indicate the risk involved ranging from high (dark red) to low (dark green). Growth shares are risky investments, and even the dark green, low risk (top right) corner of my EGS-model contains high risk compared to large companies on main lists or bonds.