Deciphering the factors that influence company valuations is crucial for investors. Two key metrics that play a pivotal role in valuations are profitability and growth rate. We’ll understand how profitability and growth collectively affect the valuations of companies. We’ll use examples to get a hold of this correlation. Effect of Profitability (Example #1) Suppose there…
In our lookout for growth stocks, we know that looking only at past returns will be grossly incomplete. Hence, we’ve learned to focus on profit growth in our analysis. But what if I tell you that profit growth is also not enough? It is also essential to check the degree of profitability of the company….
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…
Here is the concept of self-financeable growth. I first read about it on Harvard Business Review (HBR). The write-up was interesting. Hence I thought to write about it, in my words, for my readers. How I landed up on HBR? Recently Indian stock market is buzzing with IPO’s. Most of the IPO’s attracted the attention of…
Which are the fastest growing cities in India? It is a question which attracts lot of attention. But the problem with this question is, which parameter shall be used to ‘quantify fast growth’ of cities. To make it easy, I decided to use property rates as one yard stick. The city whose property rate is…
