In this video i have done analysis of GICRE or General Insuarance Corporation of India on a standalone basis. I have analysed many Ratios to look at the overall health of the company. I urge you to watch it multiple times to understand these ratios thoroughly as that will enable you to take informed decision not only for this company but for any company you may intend to invest in future.
Fundamental Ratio Analysis & Share Price Analysis
Published : Nov-2019
All Important Ratios are Explained in their own individual Accounting Statement :
1) Efficiency Metrics : Sales Turnover
Debt to Equity Ratio ( D/E )
Interest Coverage Ratio
Debtors Turnover & Debtor days
Depreciation
Net Block
2) Cash Flow Metrics : Cash Flow from Operations ( CFO )
3) Growth Metrics : Sales & Net Profit growth 5 years, Annual & Quarterly.
4) Return Metrics : Return on Equity ( ROE )
Return on Assets ( ROA )
Return on Capital Employed ( ROCE )
Operating Profit Maring ( OPM )
Net Profit Margin ( NPM )
5) Solvency Metrics : Current Ratio & Working Capital
6) Valuation Metrics : Price to Earnings Ratio ( P/E )
Price to Book Value Ratio ( P/B )
Price to Sales Ratio
I have Explained a few ratios in Detail:
Fall in Price creates opportunity to buy good fundamental companies at low price. Also If the price has fallen substantially it may indicates some problem in the company.
Earnings Yield % measures the profit earned on each share against the price paid.
P/E Ratio measures how many times more we are paying for the earnings of the company.
Price/Cash from operations measures price multiple we are paying against cash earnings of the company. More important than P/E ratio which most investors look at. Cash from operations includes only Cash inflows and outflows from operations of the business. Whether the profit companies have shown is actually being received in cash. Don't pay more than 25 times of cash earnings.
Price to free Cash flow Ratio helps us understand where the price is against the free cash flows of the company. Free cash = Cash from operations - Cash expenditure incurred on purchase of Assets.
P/B Ratio tells us where the price of the stock is against the book value of the share. Book Value is the actual price of the share as per the companies records.
PB x PE Ratio : As per this rule, the product of a stock's price to earnings (P/E) and price to book value (P/BV) should not be more than 22.5 i.e., P/E of 15 multiplied by P/BV of 1.5. This ratio is for conservative investors.
Sales & Net profit growth calculates the Compounded growth in Net Profit and Sales over last 5 and 3 years ? We should expect the companies sales and Net profits to grow above 10% every year.
PEG Ratio - Is the Price/Earnings Multiple we paid for the Earnings justified? What is the growth in earnings over last 5 and 3 years? Look for PEG of Less than 1.5.
RoE indicates the Profit generated on Shareholders money.
RoA indicates the EBIT generated on Fixed Assets and Working Capital.
RoCE indicates the Profit earned on networth + Borrowings.
This video is for Educational purpose. Investors can use these ratios to understand the quality of the companies listed on stock exchanges BSE and NSE. Investors should buy gradually at reasonable price levels.
Data Source : Screener.in
Email : valueinvestingaudit@gmail.com
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