ROCE (Return on Capital Employed) is a financial ratio. ROCE formula has two components, EBIT and Capital Employed. EBIT represents the profit, and Capital Employed represents the funds used to generate the profit. The ratio between EBIT and Capital Employed shows how much profit is being generated for every Rupee of the employed capital. The…
Smart investors would not ignore the three investment rules described in this article. This blog is inspired from a book called “The Intelligent Investor” written by the Guru of Warren Buffett, Benjamin Graham
In the next 20-years investment horizon, one sector that stands out from the rest is Pharmaceutical. Though, as a whole, this sector is not as profitable, there are pockets of value. Stocks of a few companies stand out. But if direct stocks are not for you, pharma ETFs will do. The Exchange Traded Fund (ETF)…
Stock market investing is not only about buying and selling stocks. After a stage, the investors begin to see the investments as a collection of stocks. Single stocks transform themselves into a shares portfolio. A stage comes when the investor starts to pay less attention to individual stocks. For him/her, more important is the present…
In this article, we’ll see an approach to identify the best sectors to invest in the Indian stock market. The good sectors are the ones that are intrinsically profitable. So, this analysis is totally based on the concept of profitability. The best sectors will be the ones that are most profitable. The Top Sectors List…
The formula of working capital (WC) has two components, current assets, and current liabilities. Both are the numbers of the past. Though it is derived from the past numbers, the working capital use is in the future. This is the reason why it is a vital number in both corporate finance and valuation. Companies report…
Sustainable Growth Rate (SGR) is the growth rate that a firm’s current profit levels can sustain on its own (Self financeable growth). Suppose a company’s SGR comes out to be 8% per annum. It means the company can grow its sales, profit, share price at this rate just by reinvesting its earnings. For such a…
Recently I was reviewing a list of stocks from the BSE-500 index. I found some stocks showing negative shareholders’ equity. I wondered, what caused the negativity? The companies I’m talking about are these: None of the above companies are financially healthy. To cross verify, I checked their overall scores in my stock analysis worksheet. These…
We already have multiple financial ratios emanating from the balance sheet and profit and loss accounts. Why do we need to add cash flow ratios to the list? Profit and profitability are a measure of the company’s ability to yield cash. Cash is king. No matter how big the quantum of profit and profitability is,…
People who are hunting for bargains in the stock market may fall prey to the value trap. A stock whose price is falling or is trading at a low PE ratio may prove to be a trap instead of an investment. Fans of Warren Buffett would love to emulate his investment style. But his style…
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I generally write about fundamental analysis of the business. I got this feedback that such articles are less helpful for the novice. They would prefer a more basic write-up that covers stock investment for beginners. So, I thought to give it a try in my writing style. Stocks trade in the stock market. So allow…
Value investors keep looking at the signs of a market crash. Why? Because they make more money during a crash than in normal times. It will not be an overstatement that they crave for the index to crash. Why? Because it is the time to buy the best shares. The indices move in cycles. There…
