Falsifiability — what would prove you wrong

mentor: The strongest analysis carries its own undoing: it names, up front, the evidence that would prove it wrong. A read you cannot imagine being wrong is advocacy, not analysis.

The read on the company below is that its profitability is carried by its gross marginDefinitionGross marginThe share of each revenue dollar left after the direct cost of producing what was sold. It is the first read on pricing power and production efficiency, and the starting point of every margin analysis.Gross margin = Gross profit ÷ Revenue = (Revenue − Cost of revenue) ÷ RevenueDrivers: Price · Cost · Volume · MixFull definition →. Write what future FILED evidence would break that read — the filed line that would move, the direction it would have to go, and the coming filing you'd read it in. Not a share-price move, and not a vague worry.

A falsifier has three parts. Name the filed line that would have to move — margin, cost of revenue, the services mix. State the direction that would break the read — falling, or rising faster than revenue. And name where you'd see it: a coming 10-KDefinitionForm 10-KThe audited annual report a US public company files with the SEC — the most complete single document about a business: audited financial statements, management's discussion, risk factors, and the auditor's own opinion. It is the primary source nearly every figure on Echelon grounds to.One 10-K = audited statements + MD&A + risk factors + auditor's reportDrivers: Assurance · Cadence · Restated comparativesFull definition → or 10-QDefinitionForm 10-QThe quarterly report — condensed financial statements and an updated management discussion, filed for each of the first three fiscal quarters. It is reviewed by the auditor but not audited, and the fourth quarter never gets one: Q4 lives only inside the annual report's full-year figures.Fiscal year = 3 × 10-Q + one 10-K (the fourth quarter reports only inside the annual)Drivers: Cadence · AssuranceFull definition →, not the stock. State the direction off where the figures sit now, not an invented future number.