|
|
14 |
Growth% |
15 |
Growth% |
16 |
Growth% |
17 |
Growth% |
18 |
Equity Share Capital
It refers to the portion of a company's equity that has been obtained by trading stock to a shareholder for cash or an equivalent item of capital value. EPS is impacted by bonus shares , share buyback , issuance of more numbers of shares.
Splits do not have negative impact on shareholders but if Company keeps on issuing more and more shares to meet its capital needs then the company may be in the business which is capital intensive , requires lot of money for meeting working capital needs and for plants and equipments.The Company is generating less cash than what is needed.We should be very cautious in investing these companies.
|
Equity Share Capital |
88.78 |
0 |
88.78 |
0 |
88.78 |
0 |
88.78 |
0 |
88.78 |
Reserves
Company's Net Profit can either be paid out as dividends or can be used to keep the business growing. It can also be used for buy back the shares.When it is retained in the business, it is added to balance sheet under shareholder's equity, called Retained Earnings or Reserves.
Reserves (current year) = Reserves (previous year) + Net profit - Dividend
If company is making profit after paying dividends then reserves will keep on increasing year after year.
If the company makes loss in a year and this loss is subtracted from reserves causing depletion of reserves.
Analyzing the growth of retained earing is a important factor while analyzing the company.
Titan's Reserves have been increasing at average rate of 36% for last 5 years , for Colgate it is 30% , Maruti - 20%.
Reserves can also be increased when one company acquires another company , in this case retained earnings of both the companies are added to the balance sheet.
|
Reserves |
2435.18 |
23 |
3003.23 |
14 |
3425.82 |
23 |
4223.23 |
20 |
5105.21 |
Networth
When we subtract all liabilities of the company from all assets you we get Net Worth.It is also called ShareHolder's equity. This is the amount of money that company's owners /shareholders have intially put in and have left in the business to keep it running.
Networth = Total Assets - Total Liabilities
OR
Networth = Equity Share Capital + Reserves.
Analyzing the growth of Networth is a one of the factor while analyzing the company.
Titan's Networth has been increasing at a rate of 35% for last 4 years , Maruti 19%.For Ashok Leyland it is 6% for last 3 years.
|
Networth |
|
0 |
|
0 |
2523.96 |
39 |
3514.60 |
47 |
5193.99 |
Secured Loans
will provide later
|
Secured Loans |
606.27 |
-83 |
99.79 |
13 |
113.05 |
843 |
1066.49 |
-32 |
717.52 |
Unsecured Loans
will provide later
|
Unsecured Loans |
200.00 |
-100 |
0.00 |
0 |
0.00 |
0 |
800.60 |
10 |
886.34 |
Total Debt
Debt is the money taken by company for meeting its working capital , future expansion, aquisitions. It can be a short term debt or long term debt.
Short term debt is money that is owned by the corporation and due within the year.It can be commorcial paper and short term bank loans.It is mainly used for meeting working capital needs.
Long term debt is the debt which has maturity of more than a year.It us usually used for capital expansion and acquisitions.
Companies with durable competitive advantage often carry little or no long term debt. This is because these companies are so profitable that they are self- financing when they need to expand the business or make acquisitions , so there is never a need to borrow large sum of money.
If debt is there then debt/net earning should be less than 6.
We should also check the rate of growth of debt on yearly basis , this should ideally be less than growth rate of Net profit.
|
Total Debt |
806.27 |
-87 |
99.79 |
13 |
113.05 |
1551 |
1867.09 |
-14 |
1603.86 |
Total Liabilities
will provide later
|
Total Liabilities |
2393.83 |
-6 |
2248.26 |
13 |
2558.45 |
-21 |
2011.02 |
22 |
2473.37 |
Gross Block
Company's manufacturing plant, equipment and its property , and their collective value are carried on the balance sheet as an asset.They are carried at their original cost.
Companies that don't have a long term competitive advantage are faced with constant competition , which means that they constantly have to update their manufacturing facilities to try to stay in competition , often before such equipment is worn out.
Great Companies do not have to constantly upgrade their plant and equipments to stay competitive.
We should avoid companies that needs to contantly spent lot of money on plant and equipments.
|
Gross Block |
1045.78 |
14 |
1193.57 |
12 |
1340.06 |
-40 |
799.65 |
40 |
1127.36 |
Less Accumulated Depreciation
All machinery and builings eventually wear out over time.This wearing out is recognized as depreciation.
For e.g a manufacutring company buys building, plant and machinery for 100Cr, assume that life expectancy is 10 years for property , plant and machines.
Now (100/10) 10 Cr will be deducted as deprecation amount from income statement and in balace sheet 10Cr will be subtracted from Gross block as depreciation after one year.
After second year , 10 Cr + 10Cr will be subtracted from the Gross block.So the Accumulated depreciation for second year will be 20Cr, for third year it will be 30Cr.Here we have assumed that Company has not spend any new money on property , plant and equipment after first year till 10 years.
After 10 years company has to buy new building plant and machinery with additional cost.
Deprecaition cost vary from industry and tends to be high for manufacturing industry and low for service industry.
|
Less Accumulated Depreciation |
449.54 |
13 |
510.34 |
11 |
571.46 |
-81 |
102.99 |
71 |
176.19 |
Net Block
All machinery and builings eventually wear out over time.This wearing out is recognized as depreciation.
For e.g a manufacutring company buys building, plant and machinery for 100Cr, assume that life expectancy is 10 years for property , plant and machines.
Now (100/10) 10 Cr will be deducted as deprecation amount from income statement and in balace sheet 10Cr will be subtracted from Gross block as depreciation after one year.
So Net Block after first year will become :
Net Block = Gross Block - Depreciation
= 100 - 10 = 90
After second year , 10 Cr + 10Cr will be subtracted from the Gross block.So the Accumulated depreciation for second year will be 20Cr, for third year it will be 30Cr.Here we have assumed that Company has not spend any new money on property , plant and equipment after first year till 10 years.
|
Net Block |
596.24 |
14 |
683.23 |
12 |
768.60 |
-9 |
696.66 |
36 |
951.17 |
Capital Work in Progress
Capital Work in Progress is referred to as Assets under Construction and are represented by a specific Asset class.
It is an asset on the balance sheet that is not considered to be a final product, but must still be accounted for because funds have been invested toward its production. It is thus a work that has not been completed but has already incurred a capital investment
Usually depreciation is not charged on Capital WIP.
Following are some examples of capital WIP:
- A machinery under installation
- A building under construction
|
Capital Work in Progress |
32.87 |
67 |
54.93 |
-100 |
0.00 |
0 |
158.48 |
-59 |
63.85 |
Investments
Company can use it retained earnings/ reserves for capacity expansion Or it can use access cash to invest.
It can invest it long term bonds, stocks , real estate ,fixed deposits or can acquire other companies.
Long term investment can also reflect investment in the company's affiliates and subsidiaries.
A company long term investments can tell us a lot about the investment mind-set of top management.
Do they invest in business that have durable competitive advantage or do they invest in business that are in highly competitive markets?
Beware of companies that use excess cash to make ambitious acquisitions as it can erode the entire reserves of the company.
We should also look at the revenue , profitablity , return on equity and competitive advantage of the acquired company.
You can get details of long term investment in the balance sheet of the company.
|
Investments |
26.57 |
22 |
32.63 |
126 |
73.98 |
1097 |
886.13 |
-17 |
733.75 |
Inventory
Inventory is the company's product that it has warehoused to sell to its vendors.Since a balance sheet is always for a specific day,
the amount found on the balance sheet for inventory is the value of the company's inventory on that date.
Cost of inventory mentioned on balance sheet may not be correct as the product might have become obsolete/outdated.
For e.g if the Garment company shows inventory of 400Cr then we may not be rely on this number as some of the Garments may have become obsolete and have no significance value but on balance sheet it is shown of full value.On the other hand if we take company in Jewellery business than inventory should be of reasonable value as more than 90% cost of the product is either gold or diamond.
Second important point about inventory that if inventory is increasing year by year then its sales and net profit should have the same or better growth rate than that of inventory.
If inventory is increasing at much higher rate than that of earnings and sales then it may be due to insufficient demand for Company's products and company may be finding it difficult to sell it products on desired prices.
|
Inventories |
3867.19 |
4 |
4047.43 |
9 |
4442.24 |
8 |
4806.49 |
19 |
5749.20 |
Accounts Receivables
Accounts receivable also known as Debtors, is money owed to a business by its clients (customers) and shown on its balance sheet as an asset. When a company sells its products to a purchaser , it does so on the basis of either cash up front or payment due some days after the purchaser receive the goods.Sales in this state , where the cash is due , are called receivables.
When account receivables are increasing at a faster rate than sales and profit then company may be having some problems in getting back the money from clients.If a company is consistently showing a lower percentage of Net Receivables to Gross Sales than its competitors , it usually has some kind of competitive advantage working in its favour that the others dont't have.
|
Accounts Receivables |
152.02 |
23 |
187.35 |
4 |
195.13 |
-40 |
115.36 |
67 |
192.99 |
Cash, Fixed Deposits and Bank Balance
Cash and Cash equivalents can be a money in bank , short term bonds , three month treasuries , or other highly liquid assets. Company for which cash and cash equivalents are increasing year by year , is most likely the company the company with some durable competitive advantage as it is generating much more cash than what is need for operations and capex needs. Cash can be increased due to one of below resons:
1.Company has just sold new equity and bonds to the public , and it is yet to use this cash.Or Company has got new loans from Banks
2.Company may have sold some assets like property , some subsidiary.
3.Company operations are generating lot of cash after deducting all the expenses.
We should be looking companies which comes under third category as it is likely to the company which is having some competitive advanatge and is generating huge positive cash flows year after year.
|
Cash and Bank Balance |
888.93 |
-76 |
210.20 |
-46 |
111.66 |
592 |
772.74 |
-20 |
612.28 |
Cash, Fixed Deposits and Bank Balance
Cash and Cash equivalents can be a money in bank , short term bonds , three month treasuries , or other highly liquid assets. Company for which cash and cash equivalents are increasing year by year , is most likely the company the company with some durable competitive advantage as it is generating much more cash than what is need for operations and capex needs. Cash can be increased due to one of below resons:
1.Company has just sold new equity and bonds to the public , and it is yet to use this cash.Or Company has got new loans from Banks
2.Company may have sold some assets like property , some subsidiary.
3.Company operations are generating lot of cash after deducting all the expenses.
We should be looking companies which comes under third category as it is likely to the company which is having some competitive advanatge and is generating huge positive cash flows year after year.
|
Fixed Deposits |
|
0 |
|
0 |
|
0 |
|
0 |
|
Total Current Assets
Current Assets is made up of 'cash and cash equivalents' , 'short-term investments', 'net receivables', 'inventory' and 'other assets'.They are called current assets because they are cash or will be converted to cash in a short span of time (less than a year). Current assets are also called 'working assets'.
|
Total Current Assets |
4908.14 |
-9 |
4444.98 |
6 |
4749.03 |
19 |
5694.59 |
15 |
6554.47 |
Loans and Advances
Companies sometimes pay for the goods & services that they will receive in near future, although they have not yet taken possession of the goods or received the benefits of the service.Even though the goods or services have not been received . they are paid for,so they are assets of the business.
For e.g Insurance premiums for the year ahead , which are paid in advance , would be such prepaid expanse.
|
Loans and Advances |
543.20 |
20 |
656.47 |
3 |
678.87 |
29 |
881.67 |
23 |
1093.17 |
Cash, Fixed Deposits and Bank Balance
Cash and Cash equivalents can be a money in bank , short term bonds , three month treasuries , or other highly liquid assets. Company for which cash and cash equivalents are increasing year by year , is most likely the company the company with some durable competitive advantage as it is generating much more cash than what is need for operations and capex needs. Cash can be increased due to one of below resons:
1.Company has just sold new equity and bonds to the public , and it is yet to use this cash.Or Company has got new loans from Banks
2.Company may have sold some assets like property , some subsidiary.
3.Company operations are generating lot of cash after deducting all the expenses.
We should be looking companies which comes under third category as it is likely to the company which is having some competitive advanatge and is generating huge positive cash flows year after year.
|
Total CA, Loans & Advances |
5451.34 |
-6 |
5101.45 |
6 |
5427.90 |
21 |
6576.26 |
16 |
7647.64 |
Current Liabilities
Current Liabilities are the debt and obligations that the company owes that are coming due within the fiscal year.It inlclues Account Payables , Accured expenses, Short term debt, Long term debt coming due , and other Current Liabliites.
Account Payable is the money owned to suppliers that have provided goods and services to the company on credit.For e.g company orders 1000 litres of diesel on credit so in this company gets the invoice for diesel cost.The bill or invoice is account payable.
Accured expenses are the liabilities that company have incurred , but has yet to be invoiced for.sales tax , wages payable can come in this category.
Knowing current liabilites alone in not sufficient we need to look other ratios like current ratio ,debt/earnings etc.But Still comparing amount of current liabilities to current assets can tell us alot about the business of the company
|
Current Liabilities |
2393.83 |
-6 |
2248.26 |
13 |
2558.45 |
-21 |
2011.02 |
22 |
2473.37 |
Provisions
It can be short term as well as long term. Long term provisions can be employee benefits such as gratuity , pension, indirect tax matters. Indirect Tax Matters represents estimates made for probable liabilities arising out of pending disputes/litigations with various tax authorities. Tax expense is a example of Short Term Provision.
|
Provisions |
382.97 |
12 |
432.18 |
-55 |
190.43 |
-33 |
127.41 |
-1 |
125.19 |
Provisions
It can be short term as well as long term. Long term provisions can be employee benefits such as gratuity , pension, indirect tax matters. Indirect Tax Matters represents estimates made for probable liabilities arising out of pending disputes/litigations with various tax authorities. Tax expense is a example of Short Term Provision.
|
Total CL & Provisions |
2776.80 |
-3 |
2680.44 |
2 |
2748.88 |
-22 |
2138.43 |
21 |
2598.56 |
Net Current Assets
Net Current assets can tell us if the company is able to meet short term capital needs.
Net Current Assets = Current Assets - Current Liabilities
|
Net Current Assets |
2674.54 |
-9 |
2421.01 |
10 |
2679.02 |
65 |
4437.83 |
13 |
5049.08 |
Net Current Assets
Net Current assets can tell us if the company is able to meet short term capital needs.
Net Current Assets = Current Assets - Current Liabilities
|
Total Assets |
3330.22 |
-4 |
3191.80 |
10 |
3521.60 |
75 |
6179.10 |
10 |
6797.85 |
Book Value
It is the total value of the company's assets that shareholders would theoretically receive if a company were liquidated.When we say we generally refer to book value per share which is Book Value per share = Networth / Number of outstanding shares
or
=Total shareholder equity / Number of outstanding shares
It is different from face value and stock price. For e.g is company's Networth is 100 Cr and it has issues 1Cr shares then Book value is 10 Rs. Book value often bears little relationship to the actual worth of the company.It often understates reality by a large margin.
Few point on book value:
-may not be a true indicator of company value.Machinery , inventory could be outdated and could only be sold for scrap.
-When you buy a stock for book value then you should be in a condition to calculate real book value of the company.You should know about business of the company and should have some edge in the industry to come up with realistic book value of the company
- Actual value can be more than book value as there can be real estate , mines which are shown on purchase price which may be 20 years old.In actual , the cost of property can be much more
|
Book Value |
28.43 |
22 |
34.83 |
13 |
39.59 |
22 |
48.57 |
20 |
58.50 |
Current Ratio
Current ratio tells about the liquidity of the company and also tells if it can meet the short term debt obligations.
Current Ratio = Current Assets / Current Liabilities
The higher the ratio , the more liquid the company.
A current ratio of over one is considered good and anything below one bad.
If it is below one , it is believed that the company may have a hard time meeting its short term obligations to it creditors.
Infosys current ratio is above 4, Colgate 1.09 , Cipla 2.26, Titan 1.32
Please note that lot of good companies often have their current ratio less than one. Bajaj Auto has current ratio is .88 , Hero Motorcorp .24 .Some may think that these companies might have difficulties paying current liablities.What is really happening that their earning power is so strong that they can easily cover their current liabilities.
There are many companies which have current ratio less than one but still they may be great companies which have tremendous earning power and they are using their earnings for long investments , good acquisitions instead of using their earnings in meeting working capital needs.So current ratio alone cannot tell much about the company we need to look at consistent earning power of the company also.
|
Current Ratio |
1.96 |
-3 |
1.9 |
3 |
1.97 |
56 |
3.08 |
-4 |
2.94 |
Debt to Equity
Debt to Equity ratio can tell us the relative proportion of shareholders' equity and debt that company is using to finance its assets.
D/E = Debt/Shareholders Equity.
Debt used above is generally the long term debt and does not include current liablities and provisions.
Great companies generally use their earnings to finance its operations and therefore should have less debt in comparison to equity. For non finance institutions D/E should be preferably less than .8.
Banks and finance institutions borrow large sum of money and then loan it back out, making money on the spread between what they paid for the money and what they can loan it our for.D/E equity ratio is of less relevance for financial institutions.
Infosys has D/E of 0 means no debt, Titan 0 , Maruti Suzuki 0.02 , Kingfisher Airlines(KFA) -2.39 , minus as it has negative shareholder equity. KFA is making losses from last 8 years and all these losses are subtracted from shareholders equity. Vadilal Industries 3.29.
We should note one more point here that some comapnies can show less D/E due to buybacks.
There may be a very good company which is having very low debt but still D/E can be high.This can happen when company has tremendous earnings and company is using its earnings to buy back shares.This buyback decreases its retained earning/equity base leading to superficial high D/E. So we shoud check if company has bought back large amount of shares in past if D/E appears unusual.
|
Debt to Equity |
0 |
0 |
0 |
0 |
0.04 |
1225 |
0.53 |
-41 |
0.31 |
Return on Assets
It indicates how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets
ROA = Net Profit / Total Assets
ROA is an indicator of how profitable a company is before leverage, and is compared with companies in the same industry. Titan has ROA of 41% , Infosys 28%, Gitanjali Gems 6%.
|
Return on Assets |
22 |
13 |
25 |
-20 |
20 |
-40 |
12 |
41 |
17 |
Debt/Earnings
Besides knowing debt/equity ratio , it is also important to know how much debt company needs to pay and whether it has capability to repay its debt.
Consider an example in which a manufacturing company has 5000Cr in Debt.This money was used for building new plant and machinary.Now if this company has shown average net earning of 250Cr earnings in last 2-3 years then it should ideally take around 5000/250 = 20 years to pay its debt.Here we have assumed that earnings are not going to rise exceptionally.
Even if we consider than earnings will increase at a rate of 20% even then it will take 9 years to just pay of its debt assuming that entire earnings is used to just pay the debt.
As a general rule if debt/earnings ratio is greater than 6 then we are dealing with business that require lot of money for operations and moreover the business is not generating enough money
|
Debt/Earnings |
1.09 |
-88 |
0.12 |
33 |
0.16 |
1431 |
2.45 |
-43 |
1.38 |
Return on Equity
Return on equity (ROE) refer to net profit generated on each unit of shareholder equity. ROE = Net Profit / Shareholders equity
It measures management effecieny in allocating resouces to generate more and more profit. Great companies show higher than average ROE such as 20-25%. Titan has ROE of 41% , TCS 38-44%, Maruti 16%, Cipla 14%, Gitanjali Gems 9%.
Some companies use lot of debt to support its operations and this can result in high return on equity. But we should avoid companies which are using lot of debt to increase its earnings.
For e.g Suppose a company A has equity of 100 Cr and Net earnings of 20Cr so ROE is 20%. Company B has 100 Cr equity and 200 Cr of Debt and net earning of 25 Cr , now ROE is 25%. Company B shows vurtually high ROE as it is using lot of much higher debt compared to equity.
|
Return on Equity |
0 |
0 |
0 |
0 |
27 |
-22 |
21 |
4 |
22 |
