1. How is the market structure? Is this a wonderful business? Look for rates of return on total capital to see if they consistently exceed 15% per year.
2. What are the major players? What is the market share of each competitor?
3. Does the company enjoy barriers to entry? Look for castles with big moats. Castle size is less important then moat size and depth. Rapidly growing companies in low growth industries may signal company-specific competitive advantages.
4. What is the average gross-margin for the industry? Are there any substitute, alternative products that can pose threats.