Art of Investing

Assess debt, branding, and competition with future growth to identify blue chip stocks in less competitive sectors, such as fmcg and cement, for potentially stronger returns.

Assess growth consistency by reviewing a company’s sales and net profit over the past 3–4 years in the profit and loss statement, and avoid firms with declining results.

Learn how promoter stock pledging affects loan financing and investor risk. Understand why zero pledging matters and how to verify pledge status in shareholding documents.

Learn to read a cash flow statement with operating, investing, and financing activities, and assess cash for expansion and research and development, using examples like Bajaj Finance and Tata Power.

Learn how market cap is calculated as share price times total shares, and how small-cap, mid-cap, and large-cap classifications guide safer long-term investments and growth opportunities.

Define EBITDA as earnings before interest and tax depreciation and amortization, and show how to calculate the EBITDA margin as EBITDA divided by revenue to assess positive operating profitability.

Explore return on equity (ROE), the profitability ratio calculated as net income divided by shareholders' equity, and how higher ROE and debt levels affect investor decisions.

Explore return on capital employed (ROCE) as a profitability ratio, compare ROCE with ROA and ROE, assess debt and cash to identify higher performing, lower risk investments.

Use the debt to equity ratio to gauge a company's debt when not listed, aiming for less than or equal to one. A negative ratio signals excessive liabilities.

Assess the interest coverage ratio to gauge a company's ability to pay interest; aim for above 2.5, ideally 5–10, to indicate strong financial health and credit worthiness to lenders.

Assess the asset turnover ratio, showing how well tangible and intangible assets generate net sales; unlike ROA, it reflects sales, and higher values attract investors.

Explore the price to sales ratio, a valuation metric showing how much investors pay for $1 of sales; aim for 1–2, or less than 1, and avoid above 2.

Learn how the price-earnings ratio reveals whether a stock is cheap or expensive by comparing price per share to earnings per share, and how to benchmark against sector and peers.

Explain how the current ratio measures a company’s ability to pay short-term liabilities, applicable only to companies with loans, with a range of 1.5 to 3 or higher.

Identify a company's liquidity using the quick ratio, applying it only to indebted firms; aim for a quick ratio above one, indicating sufficient liquid assets to cover liabilities.

Investing is an art, and by applying 20 steps with at least 14 in your favor, you perform fundamental analysis to select good companies for strong future returns.

Perform fundamental analysis by assessing debt, cash on hand, roe, sales and profit growth, promoter pledge status, and valuation metrics like peg, pe, and price-to-book, then compare peers.

Perform a fundamental analysis of Polycab India, evaluating debt, cash on hand, ROE, sales and profit growth, and peg vs PE ratios; compare with Precision Wire India for investment signals.

Assess a company's financial health by examining debt, cash, ROE, profit and sales growth, and interest coverage; compare peg ratios and promoter pledging to identify strong, fairly priced stocks.