The 1–2 Hour Teardown

Learning objectives

You will be able to:

1. State the teardown's purpose and its limits. Produce a "good-enough-to-have-an-opinion" read (explain the business to a smart friend, judge whether it is a good business, name the three things that matter, and say whether the price looks demanding or generous) without mistaking it for a to-the-decimal valuation; the output of a teardown is a provisional verdict plus the one variant question worth a deep dive, not a target price.
2. Run all twelve teardown questions in order, inside 60–90 minutes, spending your minutes where the value is (the money machine and the price), not drowning in the parts that don't move the verdict.
3. Find the real profit engine. That is the revenue line, segment, or hidden subscription that actually produces the economics, and it is frequently not the biggest revenue line. Then walk ₹1 or $1 of revenue down to free cash flow, naming exactly where the money leaks.
4. Run the moat quick-test. Classify the candidate advantage into Dorsey's five sources, confirm or reject it in a high, stable-or-rising ROIC across a cycle, and refuse the four false moats (great product, hot management, high share, good execution).
5. Judge the economics against a hurdle. Decompose growth into volume versus price, read the margin structure, compare ROCE/ROIC to the ~12% INR / ~8–9% USD cost-of-capital hurdle, and check cash conversion (CFO/EBITDA, FCF/PAT) to confirm the profit is real.
6. Reverse the multiple. Read what growth, margin, or return the current P/E, EV/EBITDA, or P/B is implying, using back-of-envelope inversions, and judge that implied story against base rates and the moat evidence (question 5 of the five-questions spine, answered fast).
7. Write the eight-line teardown output. Business in one line, revenue engine, unit economics, moat (source + strength), economics verdict, the three things that matter, the two things that could break it, and the price verdict plus the one question to answer before acting. Defend every line from what you read.
8. Execute the full method end-to-end on a novel company of either market, producing a defensible eight-line output and the variant question, on the clock.

Prerequisites & connections

Builds on. M8.01, the source stack and the 45–60-minute filing skim; this module assumes you can already find segment notes, the cash-flow statement, the related-party note, and the shareholding pattern fast, and reads them for verdicts rather than navigation. Everything in Phases 1–7 is now a reflex you call in seconds: the three-statement linkage (M1.05) to walk revenue to cash; NOPAT and invested capital built operating-vs-financing (M2.03) to get ROIC honest; the cash-conversion ratios CFO/EBITDA and FCF/PAT (M2.04); the quality-of-earnings Ctrl-F reflexes (M2.06–2.07) so you don't build a thesis on numbers you shouldn't trust; the reverse DCF and the "what's priced in" discipline (M3.05); the four-lens moat protocol compressed to a quick-test (M4.04–M4.05); the sector KPI panels and the right valuation multiple per business model (Phase 5); and the macro overlay (Phase 7) for the one line about where the cycle sits. The teardown is not new knowledge. It is old knowledge under a stopwatch, in a fixed order.

Feeds forward. M8.03–M8.04: the deep dive is this same twelve-question spine given two to three days, and where the teardown notes a question mark, the deep dive resolves it (builds the ten-year model, computes incremental ROIC, runs the full reverse DCF, does the scuttlebutt and the proxy read). The teardown's job is to decide whether a company is worth those three days, and to hand the deep dive its starting agenda: the one variant question. M8.05 certifies the timed teardown on never-seen companies. M8.06 teaches the six documents beyond the annual report and the 10-K that the ninety minutes keeps reaching for, so a quarterly result, an investor deck, an 8-K, an ownership filing and a rating rationale each arrive with a known skeleton rather than as unfamiliar paper. Competency C3 ("understand a business model cold") and the front half of C10 ("run the 1–2 hour teardown") are built here; from week 62 onward the company-of-the-week runs in this exact format, and from week 65 it feeds a watchlist and a simulator action (Section 5.2).