Module 3 Fundamental Analysis

Chapter 13

Equity Research (Part 1)

117

13.1 – What to expect?

Having set the context in the previous chapter, we will now proceed to develop a methodology for conducting a ‘limited resource’ equity research. The reason why I call it ‘limited resource’ is because you and I as a retail investor have access to just few resources to conduct equity research. These resources are – internet, company annual report, and MS Excel. Whilst an Institution has access to human resource (analyst), access to company management, financial data base (such as Bloomberg, Reuters, Factset etc), industry reports etc. So my objective here is to demonstrate how one can understand a company and its business better with the limited resources at hand. Of course we will do this exercise keeping the end objective in perspective i.e to make a decision on whether to buy or not to buy a stock.

As mentioned in the previous chapter, we will structure the equity research process in 3 stages-

  1. Understanding the Business
  2. Application of the checklist
  3. Intrinsic Value estimation (Valuation) to understand the fair price of the stock

Each stage mentioned above has several steps within it. One must understand that there is no shortcut to this and one must not compromise any of these steps.

13.2 – Stock Price vs Business Fundamentals

When we take up a company for research, the first step is to understand the business as much as possible. People often miss this crucial step and go directly into the stock price analysis. Well, just analyzing the stock price is great if you have a short term perspective. However for long term investments, understanding the business is essential.

Why is it important you may wonder? Well, the reason is simple, the more you know the company the higher is your conviction to stay put with the investment especially during bad times (aka bear markets). Remember during bear markets, the prices react and not the business fundamentals. Understanding the company and its business well gives you the required conviction to reason out why it makes sense to stay invested in the stock even though the market may think otherwise. They say bear markets creates value, so if you have a high conviction on the company you should consider buying into the stock during bear markets and not really selling the stock. Needless to say, this is highly counter intuitive and it takes years of investment practice to internalize this fact.

Anyway, moving ahead the best source to get information related to the business is the company’s website and its annual report. We need to study at least the last 5 year annual report to understand how the company is evolving across business cycles.

M3-Ch13-title

13.3 – Understanding the Business

As a first step towards understanding the business, we need to make a list of questions for which we need to find answers to. Do note, the answers to all these questions can be found out by reading through the company’s annual report and website.

Here are a bunch of questions that I think helps us in our quest to understand the business. I have discussed the rationale behind each question.

Sl No Question Rational behind the question
1 What does the company do? To get a basic understanding of the business
2 Who are its promoters? What are their backgrounds? To know the people behind the business. A sanity check to eliminate criminal background, intense political affiliation etc
3 What do they manufacture (in case it is a manufacturing company)? To know their products better, helps us get a sense of the product’s demand supply dynamics
4 How many plants do they have and where are they located? To get a sense of their geographic presence. Also at times their plants could be located in a  prime location, and  the value of such location could go off balance sheet, making the company highly undervalued
5 Are they running the plant in full capacity? Gives us an idea on their operational abilities, demand for their products, and their positioning for future demand
6 What kind of raw material is required? Helps us understand the dependency of the company. For example the raw material could be regulated by Govt (like Coal) or the raw material needs to be imported either of which needs further investigation
7 Who are the company’s clients or end users? By knowing the client base we can get a sense of the sales cycle and efforts required to sell the company’s products
8 Who are their competitors? Helps in knowing the competitors. Too many competing companies means margin pressure. In such a case the company has to do something innovative. Margins are higher if the company operates in – monopoly, duopoly, or oligopoly market structure
9 Who are the major shareholders of the company? Besides the promoter and promoter group, it helps to know who else owns the shares of the company. If a highly successful investor holds the shares in the company then it could be a good sign
10 Do they plan to launch any new products? Gives a sense on how ambitious and innovative the company is. While at the same time a company launching products outside their domain raises some red flags – is the company losing focus?
11 Do they plan to expand to different countries? Same rational as above
12 What is the revenue mix? Which product sells the most? Helps us understand which segment (and therefore the product) is contributing the most to revenue. This in turns helps us understand the drivers for future revenue growth
13 Do they operate under a heavy regulatory environment? This is both good and bad – Good because it acts a natural barrier from new competition to enter the market, bad because they are limited with choices when it comes to being innovative in the industry
14 Who are their bankers, auditors? Good to know, and to rule out the possibility of the companies association with scandalous agencies
15 How many employees do they have? Does the company have labor issues? Gives us a sense of how labor intensive the company’s operations are. Also, if the company requires a lot of people with niche skill set then this could be another red flag
16 What are the entry barriers for new participants to enter the industry? Helps us understand how easy or difficult it is for new companies to enter the market and eat away the margins
17 Is the company manufacturing products that can be easily replicated in a country with cheap labor? If yes, the company maybe sitting on a time bomb – think about companies manufacturing computer hardware, mobile handsets, garments etc
18 Does the company have too many subsidiaries? If yes, you need to question why? Is it a way for the company to siphon off funds?

These questions are thought starters for understanding any company. In the process of finding answers you will automatically start posting new questions for which you will have to find answers to. It does not matter which company you are looking at, if you follow this Q&A framework I’m very confident your understanding of the company would drastically increase. This is because the Q&A process requires you to read and dig out so much information about the company that you will start getting a sense of greater understanding of the company.

Remember, this is the first step in the equity research process. If you find red flags (or something not right about the company) while discovering the answers, I would advise you to drop researching the company further irrespective of how attractive the business looks. In case of a red flag, there is no point proceeding to stage 2 of equity research.

From my experience I can tell you that stage 1 of equity research i.e ‘Understanding the Company’ takes about 15 hours. After going through this process, I usually try to summarize my thoughts on a single sheet of paper which would encapsulate all the important things that I have discovered about the company. This information sheet has to be crisp and to the point. If I’m unable to achieve this, then it is a clear indication that I do not know enough about the company. Only after going through stage 1, I proceed to stage 2 of equity research, which is “Application of Checklist”. Please do bear in mind the equity research stages are sequential and should follow the same order.

We will now proceed to stage 2 of equity research. The best way to understand stage 2 is by actually implementing the checklist on a company.

We have worked with Amara Raja Batteries Limited (ARBL) throughout this module, hence I guess it makes sense to go ahead and evaluate the checklist on the same company. Do remember, the company may differ but the equity research framework remains the same.

As we proceed, a word of caution at this point – the discussion going forward will mainly revolve around ARBL as we will understand this company better. The idea here is not to showcase how good or bad ARBL is but instead to illustrate a framework of what I perceive as a ‘fairly adequate’ equity research process.

13.4 – Application of checklist

The stage 1 of equity research process helps us understand the how, what, who, and why of the business. It helps us develop a holistic view on the company. However, like they say – the proof of the pudding is in the eating; so no matter how attractive the business looks the numbers of the company should also look attractive.

The objective of the 2nd stage of equity research is to help us comprehend the numbers and actually evaluate if both the nature of the business and the financial performance of the business complement each other. If they do not complement each other then clearly the company will not qualify as investible grade.

We looked at the checklist in the previous chapter; I’ll reproduce the same here for quick reference.

Sl No Variable Comment What does it signify
1 Net Profit Growth In line with the gross profit growth Revenue growth should be in line with the profit growth
2 EPS EPS should be consistent with the Net Profits If a company is diluting its equity then it is not good for its shareholders
3 Gross Profit Margin (GPM) > 20% Higher the margin, higher is the evidence of a sustainable moat
4 Debt Level Company should not be highly leveraged High debt means the company is operating on a high leverage. Plus the finance cost eats away the earnings
5 Inventory Applicable for manufacturing companies A growing inventory along with a growing PAT margin is a good sign. Always check the inventory number of days
6 Sales vs Receivables Sales backed by receivables is not a great sign This signifies that the company is just pushing its products to show revenue growth
7 Cash flow from operations Has to be positive If the company is not generating cash from operations then it indicates operating stress
8 Return on Equity >25% Higher the ROE, better it is for the investor, however make sure you check the debt levels along with this

Let us go ahead and evaluate each of the checklist items on Amara Raja Batteries and see what the numbers are suggesting. To begin with we will look into the P&L items – Gross Profit, Net Profit, and EPS of the company.

Revenue & Pat Growth

The first sign of a company that may qualify as investable grade is the rate at which it is growing. To evaluate the growth the company, we need to check  the revenue and PAT growth. We will evaluate growth from two perspectives –

  1. Year on Year growth – this will gives us a sense of progress the company makes on a yearly basis. Do note, industries do go through cyclical shifts. From that perspective if a company has a flat growth, it is ok. However just make sure you check the competition as well to ensure the growth is flat industry wide.
  2. Compounded Annual Growth Rate (CAGR) – The CAGR gives us a sense of how the company is evolving and growing across business cycles. A good, investable grade company is usually the first company to overcome the shifts in business cycles. This will eventually reflect in a healthy CAGR.

Personally I prefer to invest in companies that are growing (Revenue and PAT) over and above 15% on a CAGR basis.

Let us see how ARBL fares here…

FY 09 -10 FY 10-11 FY 11-12 FY 12 -13 FY 13 – 14
Revenue (INR Crs) 1481 1769 2392 3005 3482
Revenue Growth 19.4% 35.3% 25.6% 15.9%
PAT (INR Crs) 167 148 215 287 367
PAT Growth (11.3%) 45.2% 33.3% 27.8%

The 5 year CAGR revenue growth is 18.6% and the 5 year CAGR PAT growth is 17.01%. These are an interesting set of numbers; they qualify as a healthy set of numbers. However, we still need to evaluate the other numbers on the checklist.

Earnings per Share (EPS)

The earnings per share represent the profitability on a per share basis. The EPS and PAT growing at a similar rate indicates that the company is not diluting the earnings by issuing new shares, which is good for the existing shareholders. One can think of this as a reflection of the company’s management’s capabilities.

FV Rs.1 FY 09 -10 FY 10-11 FY 11-12 FY 12 -13 FY 13 – 14
EPS (In INR) 19.56 17.34 12.59 16.78 21.51
Share Cap(INR Crs) 17.08 17.08 17.08 17.08 17.08
EPS Growth   – -11.35%  – 27.39% 33.28% 28.18%

The 5 year EPS CAGR stands at 1.90% for the FY14.

Gross Profit margins

Gross profit margins, expressed as a percentage is calculated as a –

Gross Profits / Net Sales

Where,

Gross Profits = [Net Sales – Cost of Goods Sold]

Cost of goods sold is the cost involved in making the finished good, we had discussed this calculation while understanding the inventory turnover ratio. Let us proceed to check how ARBL’s Gross Profit margins has evolved over the years.

In INR Crs, unless indicated FY 09-10 FY 10-11 FY 11-12 FY 12 -13 FY 13 – 14
Net Sales 1464 1757 2359 2944 3404
COGS 1014 1266 1682 2159 2450
Gross Profits 450 491 677 785 954
Gross Profit Margins 30.7% 27.9% 28.7% 26.7% 28.0%

Clearly the Gross Profit Margins (GPM) looks very impressive. The checklist mandates a minimum GPM of 20%. ARBL has a much more than the minimum GPM requirement. This implies a couple of things –

  1. ARBL enjoys a premium spot in the market structure. This maybe because of the absence of competition in the sector, which enables a few companies to enjoy higher margins
  2. Good operational efficiency, which in turn is a reflection of management’s capabilities

Debt level – Balance Sheet check

The first three points in the checklist were mainly related to the Profit & Loss statement of the company. We will now look through a few Balance sheet items. One of the most important line item that we need to look at on the Balance Sheet is the Debt. An increasingly high level of debt indicates a high degree of financial leverage. Growth at the cost of financial leverage is quite dangerous. Also do remember, a large debt on balance sheets means a large finance cost charge. This eats into the retained earnings of the firm.

Here is how the debt stands for ARBL –

Debt( INR Crs) Evaluation –

FY 09-10 FY 10-11 FY 11-12 FY 12 -13 FY 13 – 14
Debt 91.19 95.04 84.07 87.17 84.28
EBIT 261 223 321 431 541
Debt/EBIT (%) 35% 42.61% 26.19% 20.22% 15.57%

The debt seems to have stabilized around 85Crs. In fact it is encouraging to see that the debt has come down in comparison to the FY 09-10. Besides checking for the interest coverage ratio (which we have discussed previously) I also like to check the debt as a percent of ‘Earnings before interest and taxes’ (EBIT). This just gives a quick perspective on how the company is managing its finance. We can see that the Debt/EBIT ratio has consistently reduced.

I personally think ARBL has done a good job here by managing its debt level efficiently.

Inventory Check

Checking for the inventory data makes sense only if the company under consideration is a manufacturing company. Scrutinizing the inventory data helps us in multiple ways –

  1. Raising inventory with raising PAT indicates are signs of a growing company
  2. A stable inventory number of days indicates management’s operational efficiency to some extent

Let us see how ARBL fares on the inventory data –

FY 09-10 FY 10-11 FY 11-12 FY 12 -13 FY 13 – 14
Inventory (INR Crs) 217.6 284.7 266.6 292.9 335.0
Inventory Days 68 72 60 47 47
PAT (INR Crs) 167 148 215 287 367

The inventory number of days is more or less stable. In fact it does show some sign of a slight decline. Do note, we have discussed the calculation of the inventory number of days in the previous chapter. Both the inventory and PAT are showing a similar growth signs which is again a good sign.

Sales vs Receivables

We now look at the sales number in conjunction to the receivables of the company. A sale backed by receivables is not an encouraging sign. It signifies credit sales and therefore many questions arise out of it. For instance – are the company sales personal force selling products on credit? Is the company offering attractive (but not sustainable) credit to suppliers to push sales?

FY 09-10 FY 10-11 FY 11-12 FY 12 -13 FY 13 – 14
Net Sales(INR Crs) 1464 1758 2360 2944 3403
Receivables (INR Crs) 242.3 305.7 319.7 380.7 452.6
Receivables as as a% of Net Sales 16.5% 17.4% 13.5% 12.9% 13.3%

The company has shown stability here. From the table above we can conclude a large part of their sales is not really backed back receivables, which is quite encouraging. In fact, just liked the inventory number of days, the receivables as % of net sales has also showed signs of a decline, which is quite impressive.

Cash flow from Operations

This is in fact one of the most important checks one needs to run before deciding to invest in a company. The company should generate cash flows from operations; this is in fact where the proof of the pudding lies. A company which is draining cash from operations raises some sort of red flag.

In INR Crs FY 09-10 FY 10-11 FY 11-12 FY 12 -13 FY 13 – 14
Cash flow from Operations 214.2 86.1 298.4 335.4 278.7

The cash flow from operations though a bit volatile has remained positive throughout the last 5 years. This only means ARBL’s core business operations are generating cash and therefore can be considered successful.

Return on Equity

We have discussed at length about Return on Equity in chapter 9 of this module. I would encourage you to go through it again if you wish to refresh. Return on Equity (ROE) measures in percentage the return generated by the company keeping the shareholders equity in perspective. In a sense ROE measures how successful the promoters of the company are for having invested their own funds in the company.

Here is how ARBL’s ROE has fared for the last 5 years –

In INR Crs FY 09-10 FY 10-11 FY 11-12 FY 12 -13 FY 13 – 14
PAT 167 148 215 287 367
Shareholders’ Equity 543.6 645.7 823.5 1059.8 1362.7
ROE 30.7% 22.9% 26.1% 27.1% 27.0%

These numbers are very impressive. I personally like to invest in companies that have a ROE of over 20%. Do remember, in case of ARBL the debt is quite low, hence the good set of return on equity numbers is not backed by excessive financial leverage, which is again highly desirable.

Conclusion

Remember we are in stage 2 of equity research. I see ARBL qualifying quite well on almost all the required parameters in stage 2. Now, you as an equity research analyst have to view the output of stage 2 in conjunction with your finding from stage 1 (which deals with understanding the business). If you are able to develop a comfortable opinion (based on facts) after these 2 stages, then the business surely appears to have investable grade attributes and therefore worth investing.

However before you go out and buy the stock, you need to ensure the price is right. This is exactly what we do in stage 3 of equity research.


Key takeways from this chapter

  1. ‘Limited Resource’ Equity Research can be performed in 3 stages
    1. Understanding the Business
    2. Application of the checklist
    3. Valuations
  2. The objective of the stage 1 i.e understanding the business requires us to gather all information related to the business. The best way to go about this is the Q&A way
  3. In the Q&A way, we begin with posting some simple and straightforward questions for which we find answers
  4. By the time we finish stage 1, we should be through with all the information related to the business
  5. Most of the answers required in stage 1 is present in the company’s annual report and website
  6. Do remember while researching the company in stage 1, if there is something not very convincing about the company, it is often a good idea to stop researching further
  7. It is very important for you get convinced (based on true facts) about the company in stage 1. This is how you will develop a strong conviction to stay put during bear markets
  8. Stage 2 of Equity Research requires you to evaluate the performance of the company on various counts.
  9. You will proceed to stage 3 only after the company clears in stage 1 & 2.

117 comments

  1. raman says:

    Sir,
    Very informative
    When is next chapter being uploaded ?

  2. Harshad Salvi says:

    In gross profit margin calculations, i think COGS figure seems to have been considered instead of Net Sales Figure while computing the GP Ratio. GP Ratio is much lesser (more than 10%) in all cases although above norm.

  3. Harshad Salvi says:

    Karthik,
    Is it possible for you to explain on how to write research report/paper?

  4. Harshad Salvi says:

    Don’t know. But yeah.. It’s my dream to write a Professional Research Report/Paper on my own..
    Hope this is possible one day.
    Going by your credibility & forte in this financial world, need your help in accomplishing this objective

    • Karthik Rangappa says:

      It is just a matter of practice of identifying good opportunities..you will soon realize a report is just a formality 🙂

      • Harshad Salvi says:

        Yup.. But in today’s world a lot of emphasis is placed on the presentation. Hence, it is essential that identification of good opportunity being translated into proper presentation.
        I would love to make a career in this… Is it possible?

        • Karthik Rangappa says:

          Sure why not. There are many firms that require research analyst. Getting yourself a CFA certification is a good start.

  5. kumar sunil says:

    very informative and summrize tutorials.hats off for your honest efforts to aware peoples

  6. nagaraja says:

    Nice to go through user friendly simple explanation. Great effort by Zerodha and u.

  7. GK says:

    Great info Karthik garu.

    Thank you for making us to understand these difficult subjects nd procedures very easily.

  8. Suneeth says:

    Sir,
    For FY11 the operating cash flow was low compared to previous year, even though other numbers like sales, Ebit etc remains strong in FY11. what does that imply what can effect the operating cash flow of a company but still that company can be “Investment Grade”..

    Regards
    Suneeth

    • Karthik Rangappa says:

      Operating cash flow is also dependent on how well the costs are controlled by the company and therefore the margins. So a strong sales does not really translate to great operating numbers. Also, there will be business cycles which can alter the cash flow in operations…this needs to be studied as well.

  9. yogesh says:

    Image
    When I calculating CAGR all CAGR comes different from annual report Why?Like as Business Growth 18.60%,Shareholder Value Accretion 17.07% .

    • Karthik Rangappa says:

      Yogesh – Thanks for pointing this. We are in the process of re-editing the whole module. I guess there has been some mistake while exporting these numbers to excel. For now, please ignore the calculations and only look at the central idea. Also, please do continue to point out any errors you spot. Thanks.

  10. Matrix says:

    When is Stage 3 going to be explained ?

  11. RV2180 says:

    Hi Karthik , All your lessons are Very Informative and simple to understand.
    I have a question on how to perform FA to compare the performance of PSU or Private banks. What all aspects of a bank business we need to evaluate ?

  12. surendra says:

    In your investment due diligence process , you mentioned macros only for domestic scenarios .

    How to deal with Global Macros in the due diligence process ?

    Example : Present Stock Market Meltdown !!!!!

    • Karthik Rangappa says:

      Good point this one :). Honestly global macros is something that is very difficult to get a grasp on. Requires one to understand Sovereign economic balances and the interconnectivity with other countries. This is much difficult than understanding companies. I don’t think I can do justice to this topic here. But on the contrary, irrespective of what happens fundamentally strong companies always survive the toughest economic conditions!

  13. Suresh says:

    Hi,
    To check debt level of the stock, should we take short term and long term borrowing or only short term borrowing?

  14. rohan says:

    plz explain this, how come prime location price can go off balance?

    “To get a sense of their geographic presence. Also at times their plants could be located in a prime location, and the value of such location could go off balance sheet, making the company highly undervalued”

    • Karthik Rangappa says:

      Well, cant think of an example for you right now, but please do be aware that such a thing could happen…maybe transfer to a subsidiary.

  15. rohan says:

    Are they running the plant in full capacity?
    How to find this from annual report. Please explain from ARBL example

    • Karthik Rangappa says:

      Read the management discussion and analysis section in the annual report, the management will usually share information on this.

  16. rohan says:

    “Who are their bankers, auditors?”

    As a retail investor how to know who is a good auditor or not and those auditors have any malafide intention or not /

    • Karthik Rangappa says:

      Hard to answer given the fact PWC were the auditors of Satyam. But yes, you will get the name in the annual report….auditors have to sign off below the financial statements.

  17. rohan says:

    “What are the entry barriers for new participants to enter the industry?”

    where to find this information, for example for batterry companies where i can I find this information?

  18. rohan says:

    “Is the company manufacturing products that can be easily replicated in a country with cheap labor?
    If yes, the company maybe sitting on a time bomb – think about companies manufacturing computer hardware, mobile handsets, garments etc”

    I am not clear with this statment…can you please elaborate to explain

    • Karthik Rangappa says:

      So if you are a company manufacturing toys in India….then t’row cheap imports from China may harm your business.

  19. ashish chauhan says:

    hi..
    I am currently working on a bank stock, PNB. how can i calculate the gross profit margin and debt of the stock as it is not directly given in the annual report. do they use other terms for the same?

    • Karthik Rangappa says:

      Yes, banks have a slightly different balance sheet, therefore a bit tricky to analyse. Guess I may not be the right person to talk about banking stocks.

  20. Sai Sreedhar says:

    What should be the ideal/maximum Price to Earnings to be considered while choosing a stock?

  21. P Harish Dixit says:

    ऊपर आपने gross profit margin का, inventory days का, receivables का, cash flow का “Snapshots” लिए हैं ना, वो किधर से लिये हैं? (Source of the snapshots?)

  22. sainudheen says:

    Sir,
    What do you mean by PAT & PAT growth , kindly explain ?

  23. Isaac Maria says:

    Sir you have mentioned that the equity research stages are sequential, but what if I find that the Stage II Equity Research is not convincing enough ? That means I would be spending 15 hours researching about a company which I would not prefer to invest.

  24. Guruprasad says:

    How did you arrive at the debt in debt to EBIT level table?

  25. MSP says:

    Hi Karthik,

    Debt/Ebit % is coming 719% for Tata Chemical 2015-2016, Debt=8263.68 cr, EBIT=1148.8 , am i comprehending correct?

    Regards,
    MSP

  26. MSP says:

    Hi Karthik,

    Thanks, in that case, its coming 6.50, what does this mean?

    Regards,
    MSP

  27. MSP says:

    Hi Karthik,

    This means Tata Chemicals Debt is more than 6.5 times of the profit they are generating, which i guess is a bad sign for the company.

    Am i right ?

    Regards,
    MSP

  28. MSP says:

    Hi Karthik,

    If that is the case, why people are investing in Tata chemicals?

    Regards,
    MSP

  29. Prathvi.R says:

    How do we find out the amount of dividend paid out if it is expressed in terms of percentage ? (Eg:Infosys March 2016 div. payout was 40.72% , is it 40.72% of the face value ?)

  30. Krishna.K says:

    Hi Karthik,
    a small doubt, what is meant by SHIFTS IN BUSINESS CYCLE and another doubt is what is CAPPEX CYCLE. Please through some light on this sir.
    Thanks&Regards

    • Karthik Rangappa says:

      Shift in business cycle indicates the way business is conducted – for example companies in commodity business. Hindalco’s profits depend on the prices of Aluminium and copper…if the prices increase so would the margins of Hindalco…if they decrease, so would Hindalco’s margin.

      Capex cycle refers to capital investment made by the company.

  31. Abhishek says:

    Sir, what should be the lower limit for Market Capitalization for starting to evaluate a company.
    I mean, Market Cap should be greater than _____. (to avoid scams and find legit comapnies)

  32. Sai Sreedhar says:

    While calculating PEG (Price to Earnings to Growth rate) which growth rate should we consider? Is it EPS (CAGR of last 5 years or so) or Revenue (CAGR of last 5 years or so)? Or is it based on the forecast the company proposes in the annual report?

  33. Ankit says:

    Best topic ever covered. Most useful of newbies and experienced people can take as refreshment training. Best 😀

  34. Kishore Agarwal says:

    Hi, I had a question regarding diluting the company’s equity, in this example I can see that the company is growing it’s PAT at a CAGR of 17% while EPS CAGR is only 1.9%. So does that mean the company is diluting it’s equity and it’s a bad sign for Minority shareholder’s

  35. Romil says:

    Is there any module coming up on Financial Modelling? Do you teach Financial Modelling?

  36. Romil says:

    Sounds Great…Learning a lot from your website….you guys are doing a wonderful job 🙂

  37. SUNANDA SINGHA says:

    Dear Karthik
    It is found that all equities of NSE are not tradable in Zerodha platform.Eg. I tried yesterday 22-05-17 to trade SHAKTIPUMP, but I found it was blocked by zerodha.What is the reasons of suck blocking ?. How can i get the total list of such blocked equities of NSE and BSE. Please help

    Regards,

    Sunanda

    • Karthik Rangappa says:

      Can you check again, Sunanda?

      I just loaded the stock on my market watch and it seems to be working fine!

  38. Rushikesh says:

    Sir can u tell me how u got the eps of 19.65(should be 167/17.08=9.77) and 17.34(148/17.08=8.66) for the year FY10 and FY11 respectively under EPS explanation. The other 3 years values are correct but , how u got the above mentioned values.

  39. Amit says:

    What a great work ! So easy to understand that I have a doubt only in this chapter.
    To get a sense of their geographic presence. Also at times their plants could be located in a prime location, and the value of such location could go off balance sheet, making the company highly undervalued.
    Please clarify .let’s take example of Bhushan steel .it’s plant in Shahibabad is at prime location .if prime location here means somewhere in posh locality ?or prime location means like Orissa plant where raw material like ore ,zinc is available easily ,coal is there so cheap is power generation ?
    Second Question balance sheet vala part.

    Thanks again for educating us !

    • Karthik Rangappa says:

      Prime location can be any valuable piece of land which the company owns. It could be the value of the land itself or proximity to resources.

      Happy reading 🙂

  40. VIRAT says:

    For stage 2 of the research, we apply only some of the financial ratios that you taught us in the previous chapter. For example, in Stage 2, ratios like the P/E ratio and such are not included. Which of the other ratios should we be looking at?

  41. Naveen says:

    I wonder why AMARA RAJA remained flat even with such great fundamentals for last 3 years?

  42. Wrik says:

    How to calculate inventory days?

  43. Roji Mathew says:

    Sir,

    Like this module,can you explain in a separate module,how to find turnaround companies and multibagger. Really your expiation about the fundamental analysis is very easy to understand to anyone.

  44. Abhishek Kubal says:

    Thank you for the info.

    For calculating debt you have taken only long term borrowings and short term borrowings.

    Why are trade payables and provisions(short term and long term) not added to calculate debt?

    • Karthik Rangappa says:

      Short term is mainly Çurrent in nature, meaning they will be serviced within the financial year, hence we need not have to consider this. However, to get a sense of the short-term debt condition, we can look at the working capital condition of the company.

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