Started tracking Astra Microwave..
http://value-picks.blogspot.com/2013/06/astra-microwave-products-ltd-niche.html
http://www.youtube.com/watch?v=rczvTDDqW34
http://value-picks.blogspot.com/2013/06/astra-microwave-products-ltd-niche.html
http://www.youtube.com/watch?v=rczvTDDqW34
STOCK ANALYSIS TEMPLATE:
About Company:
Profile: Indian defence, space technical company - provides material to DRDO, ISRO and export as well. Its early mover in defence sector - built reputation (getting export orders as well)
Products:
% or revenue per business verticals.
Products:
What are Raw Materials?
- Can input cost affect margins?
Finished goods: Can inventory become obsolete? Will it value same in future?
Main customers.
- Can comp pass on price increase?
- How much top customers contribute to revenue? Overdependence of few customers to revenue? Bargaining power of customers,
- How much it cost for customers % monthly expenses?
Main suppliers
- bargaining power of suppliers.
- Back up plan?
GROWTH:
- What it takes for growth? capital intensive? technology obsolence?
Main Competition
Recession Proof?
Cyclical
Patents
Other?
MOATS:
Identify moats
Sustainable?
Why can’t competitor replicate this?
What would kill the company?
About Sector:
Growth rate
Competition
Margins
MANAGEMENT:
Education qualifications: Technocrat with rich experience
Reputation
Scams
% of Salary of net profits
Communications about growth/risks etc
AR - how candid AR is
Peformance track record - How many years they have handled the comp
Capital allocation in past?
Financial Analysis
Compounded 3, 5 10 year sales
Download from Screener.in
1 year
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3 Year
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5 Year
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10 Year
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Sales Gr
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Profit Gr
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Net cash
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Free Cash
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ROCE
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ROIC
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Div Yield
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Tax rate
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Tr
Ratio’s as of
D/E
PEG
ROE
Margins
Is Sales growth much higher than Profit growth?
Is Growth much higher than ROE?
DuPont Analysis
Is Debt increasing?
BUSINESS ANALYSIS
From where the growth is coming? Analyze sources of growth? Are they sustainable?
TRIGGERS:
FUTURE OUTLOOK
BEAR CASE/RISKS:
- Technology obsolcence
- Competition
- Government regulations
- Cheap Imports
- Supplier side risk
- Managemnt - Top managment about to retire and no succession planned yet.
VALUATIONS
Current P/E
Future P/E
Highest and min P/E?
PEG
P/B
Sector Leader P/E?
When to buy?
Bear Case / worse valuations:
RED FLAGS
WHY TO BUY
WHEN TO SELL
KEY MONITERABLES (for Buy /Sell/Hold decision/ mngmnt tracking)
- Key points from AR:
Growth targets:
Expansions:
Acquisitions
Margins
- Tax Rate
- Promoter Holdings.
- Dividend Yield.
CHECKLIST
Business
- Can I explain in simple words what exactly does and how it earns revenues? Is it simple and can be run by any fool?
- How certain are earnings? Will they be consistent year after year? Will this business exist with same competitive advantage for more than 10 yrs?
- Has business got enormous moat? Evaluate reasons when and how can this moat be breached? Uptil when this moat will exist?
- Product differentiation
- Perceived differentitaion
- Low cost
- Does business generate strong cash flow?
- Can company negotiate terms with suppliers? And can it increase price withouit hurting sales?
- IS company cyclical? HOw big is cycle and in phase you are sitting right now?
- Will inventory become obsolte after some time? e.g. apparel, fashion, technology etc.
- How big is industry and how much share can company take? Is it too competitive. How can comp increase its share?
Management Quality?
- Is management known for its integrity? Any scams, corruption? Public reviews?
- How was management allocated capital in future? Any wrong decisions?
- What are management salaries compared to profits? Is ti too high?
- What has mngmnt done with free cash in past? Future plans?
- Has there been substantial equity dilution in past?
- HOw much is owned by management?
- How open is mngmnt in AGM? Q n A sessions? Have they delivered on thier promised? (track thier past AR’s and see if they delivered?)
Financial Performance
- Does the business has consistent sales, net profit, ROE, ROCE, Dividend, payout ratio? Is there room for future growth
- What are margins of company and competitor? Is there vast difference? Can it maintain it?
- Is operating cash flow higher than net profit?
- what is D/E? less than .5?
- Is current ratio greater than 1.5
- Is the Altman Z score > 3?
- Is company capital intensive? Does comp needs capital to fuel growth?
- Free cash flow/sales greater than 5%?
- What is PEG, Is growth more than ROE? IS growth lot more bigger than ROE? If yes its negative then comp will have to dilute capital. If ROCE is lower thann growth, then determine factors why it is low.
- What is dividend yield and payout ratio? Is it consistent?
TRACKING
Annual Reports:
Quarterly Reports
Management talking (see if they achieve what they talked).
- Do they oversell targets?
