How to do Financial Analysis of a stock using Moneycontrol.com

What to look for in a stock before investing?

Today, I am going to explain key indicators to be seen for investment in a stock using MoneyControl. For this purpose I have chosen my favourite share - KRBL. By "investment", I mean Investment and not Speculation i.e. holding share for a period longer than in days or weeks, say, months Let's see - 

This frame shows you will the live price feed, Last Day's closing Price, Today's Opening Price, Bid Price, Offer Price, Daily's Highest and Lowest prices, 52 week(yearly) highest and lowest prices and Lower/Upper Price Band.

Bid Price is the highest price buyers are offering to pay to buy shares.

Offer Price is the lowest price sellers are willing to take for selling their shares.

This frame has not much of a use in taking the decision here under question. Thought you can see past 52 weeks, Lowest Price was 217.50 and highest was 451.70 i.e. more than 100% movement in a span of 52 weeks.

Frame 2 - MoneyControl.com

Coming next is Frame 2. On scrolling down, you we come to this frame.

Market Cap is nothing but (current market price * no. of shares issued by the company).

P/E Ratio is Price/Earning Ratio i.e. Market Price of the stock in respect to EPS of the stock.

Book Value is the Intrinsic value of share i.e. Net Assets (Total Assets - Total Outside Liabilities) / Total no. of issued shares.

Div(%) is the latest declared dividend with respect to Face Value of Share.

Similarly, Div Yield is total of 12-month's dividends paid (historical or forecast) divided by the latest share price.

EPS is earning per share i.e. after tax 12-month's earnings divided by the number of shares outstanding.

P/C is Put/Call Ratio or the ratio of put trading volume divided by the call trading volume.

Price/Book is as the name signifies, Ration of Market Price to Book Value of share.

Industry P/E is the average P/E of all the companies under this sector/segment.

Deliverables are total volume traded shares which are actually transferred from one person's to another's demat account. In short, ownership is transferred.

From this Frame, the only thing that matters if P/E ratio of company and industry. Usually if the P/E Ratio of the company is less than it's industry's P/E, the stock is said to be undervalued. Reason being, Average price of peer companies with respect to their earnings(or EPS) is more than the price of this stock. Like in current Frame, the average industry P/E is 25.08, which means on average, for every Re. 1 of EPS the price of stock is Rs. 25.08, where for KRBL the price is Rs. 23.09 for every Re. 1 of EPS.

However, comparing P/E Ratios should not be the sole indication as to whether the stock is worthy buying or not. Say, a company has been continually performing negative and has been having losses for years, it's obvious that the P/E of such company will be lower than its peers'. So, P/E can be used as a selection criteria as to which company can be invested into.

Book Value, as mentioned above, is the intrinsic value of the share, which means if the company goes into winding up, the amount realised per share would be near about this value. Since, while dealing we assume that company will run for an unseeable future, current book value is not given much weightage. However, this also can be used as a selection criteria. Search for shares whose current market value is lower than it's book value per share and if the financial performance of the company has been profitable and there is no huge negative news about it, one can safely invest in it a well.

To present a brilliant example, Reliance Capital has a current market price of Rs. 579.40 and its book value per share is Rs. 602.80 with a P/E of 13.48 as against industry's average P/E of 36.09. A superbly amazing stock to invest in, expected to cross Rs. 1500 mark in a year or two.

Coming to next frame is, the left hand side-bar -

News tab will showcase the latest news related to the relevant stock. It gives you info about the latest actions taken by or in respect of the company or nay other news related to the company, whether or not it affects its price or not. Usually in short term, every news has a little impact, but for long term impacts, the news will be quite huge, say huge growth in revenue or profits, or Company going insolvent, or Govt./SEBI/any other government department taking any legal action against the company, etc. It can be anything.

Comments are nothing but views shared by our fellow investors and speculators. (Not to be followed blindly. Personally would suggest to stay away from this section.)

Announcements include announcements, disclosures made, notices issued by/to the relevant company.

Financials, the most important tab to look into, covering from past yearly/half-yeearly, quarterly financials to Financial Ratios all under one tab.

1. Balance Sheet - What to look under Balance sheet? Or one might ask how to study balance from the face of it?

Most importantly, check the Reserves and Surplus. If they have been increasing constantly or even better, the company is functioning well. I they are falling, its a matter of concern. If there was a fall only once, one can look into the reason whether it was due to bonus issue or some other causes (the details can be checked under News Tab for that particular year).

If Fixed Assets have been increasing that means the company is expanding its operations, which is a good sign. If their value is diminishing with a decreasing rate, then are simply being depreciated i.e. there is no major purchase/sale of Assets. If you notice a significant fall in value of assets, check the News Tab and make sure the company is not planning to de-merge/sell of a unit/wind-up. A fall in Assets value is a sufficient reason to not to invest in its stock.

Note the amount of Loans taken. The same will be re-conciled with interest appearing in Profit and Loss Statement.

2. Profit & Loss Statement - What all to see under this statement?

Increasing revenues? Check

Increasing Profits? Check

Increasing EPS? Check

All set to go - all good!

One thing more to see (just for fun) the loans/borrowings of the company appearing under Liabilities (under balance sheet) and the interest expense (finance costs) should be in correlation i.e. if the amount of loan has increased, so should have been the finance cost and vice versa. However in exceptional situations this might not stand true, but in most scenarios it does.

3. Quarterly Results - This is just quarterly P&L Statement issued by the company on quarterly intervals. One can se the growth in terms of Revenue, Profits and EPS quarter-wise and also compare the same of current quarter with the same quarter of previous financial year. If the performance even shows a steady growth, the company is functioning well.

4. Half-yearly Results/Nine months results -  Same goes for these two tabs as well. Nine-months results however show P&L statement of first nine months of a financial year i.e. upto December.

5. Cash Flows - Another major statement to get an overall idea of how well the company is performing.

A company's strength lies in its operations, so if the Cash flows from its operational activities is negative, it is matter of serious concern. However, steady growth and reducing cash outflows is a good sign.

Cash Outflows in financing Activities suggests that the company is expanding its operations, that is the reason it has finial cash outflows because it is buying capital assets.

6. Ratios - Financial Ratios - How to read them?

Most ratios are self explanatory as their names suggest.

Basic/Diluted EPS is usually same. Even if it is different the difference won't be much. It simply suggests Earnings per Share i.e. the company's latest distributable profits earned per share.

Cash EPS is similar to Basic EPS. It just takes into consideration actual Cash profits earned by the company. Basic EPC considers nominal profits as well, whereas Cash EPS just considers Cash profits.

Book Value per Share  is nothing but Intrinsic Value as told above.

Dividend per share is Dividend proposed/paid by the company per share. Relevant for those who invest with the purpose of earning dividend incomes.

Operational Revenues/Share is part of Profits per share attributable only to company's operational activities.

And so on...

Main things to see are - 

EPS should be increasing

Cash EPS should be increasing

Revenue from operations per share should be increasing

Price/Book Value(BV) if above 1 means it is overvalued and if increasing means there is a risk that if company's profits reduce one can expect a fall in its price.

7. Shareholding - For one who doubts his analysis can also see how institutions find the stock under this tab.

Shareholding is majorly divided into two parts - i) Promoters; and ii) Non-promoters

 - Promoters usually have a holding of more than 30% of the share capital, less than that creates doubt    for credibility of the company.

 - Under Non-promoters, we further have two types of investors - a) Institutional; and b) Non-   Institutional (like you and me)

    --   If there is institutional holding of more than 10%, it indicates professionals find this stock worth investing as well. By professionals, I mean Banks, financial institutions, Insurance undertakings, mutual funds, Foreign investors etc.

     --    The rest is held by non-instituonal, non-peormoter group of investors.

These are the key things that can be checked just by going through a stock at one site (MoneyControl.com). Hope it helps my fellows in making batter decision. Will try to soon post another post as to what other things have fundamental impact on stocks, and maybe some technical indicators to see as well after that.

Keep liking, promoting and sharing.... and make huge monies...!!!

Note: I am not in anyway (other than being a user) related to Moneycontrol.com. I am not a registered advisor with SEBI. This post is solely for education purposes.