Table of Contents

1- Profitability
A. Return on Investment (ROI)
B. Return on Assets (ROA)
C. Return on Equity (ROE)
D. Return on capital employed (ROCE)
E. Operating Cash Flow Margine
F. EBITDA Margine
2- Growth
A. Earnings per share (EPS) Growth
B. Dividend Growth Rate (DGR)
C. Revenue Growth
D. Cash Flow Growth
E. EBITDA Growth
F. EBITDA to-interest Coverage Ratio
G. CAGR – Compounded Annual Growth Rate
3- Valuation
A. PE Ratio
B. PB Ratio
C. PS Ratio
D. Dividend Yield
E. Face Value
4- Financial Ratio
A. Interest Coverage Ratio
B. Quick Ratio
C. Current Ratio
D. Debt to Equity Ratio (2-2.5)
E. Earning Power
F. Asset Turnover Ratio
G. Inventory Turnover Ratio
5- Analyst Rating
6- Ownership
7- Technical Ratio
A. Volatility
B. ADX Rating – Trend Strength
C. Relative strength index (RSI)
D. MACD indicator
E. Alpha (α)
F. Sharpe Ratio
G. Beta (β)
H. Exponential Moving Average (EMA)
I. Parabolic SAR (Stop and Reverse) Indicator
J. Accumulation Distribution (AD) Line

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 Profitability
Return on Investment (ROI): -
• Return on investment (ROI) is an approximate measure of an investment's
profitability.
Return on Assets (ROA): -
• ROA indicates a company's profitability in relation to its total assets and
indicates whether a company uses its assets efficiently to generate a profit.
Return on Equity (ROE): -
• Return on equity (ROE) is the measure of a company's net income divided by
its shareholders' equity. ROE indicates the corporation's profitability and how
efficiently it generates those profits.
• The higher the ROE, the better a company is at converting its equity financing
into profits.
Return on capital employed (ROCE): -
• ROCE is the measures of how efficiently a company is using its capital to
generate profits.
• ROE considers profits generated on shareholders' equity, but ROCE is the
primary measure of how efficiently a company utilizes all available capital to
generate additional profits.
• Warren Buffett says that he prefers companies where the ROE and the ROCE
is approximately equal, and the figure is above 20%.
Operating Cash Flow Margine: -
• It is a cash flow ratio that is used to assess the percentage gain or loss of total
sales revenues from the cash of its operational activity for an outlined period of
time.
• OCF margin is a reliable tool that is used to assess how profitable a company is,
its level of efficiency, and the quality of its earnings with respect to transactions
that involve transfer of actual money.
• This holds particularly true with regard to comparisons drawn between
competitors operating in the same industry.
EBITDA Margine: -
• The EBITDA margin is a prominent indicator of an organisation’s financial
standing with respect to the total revenue. It is also a representation of the
efficiency of a company’s cost-cutting ventures, a robust and well-managed
cash flow and low operational expenses.
• It indicates how much cash can be generate against Re.1 of its revenue sans
external and non-operational costs.
• One of the primary advantages of EBITDA is it facilitates comparison between
two companies belonging to the same industry but with comparatively higher
or lower market capitalisation.

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 Growth
Earnings per share (EPS) Growth: -
• Earnings per share is used for evaluating the profitability of a company.
• EPS is the share of a company’s profit that is distributed to each share of stocks.
Further, it is considered to be a significant financial parameter as it helps to
gauge a company’s financial health. To elaborate, higher EPS reflects greater
profitability from the company and its overall ventures.
Dividend Growth Rate (DGR): -
• The dividend growth rate (DGR) is the percentage growth rate of a company's
dividend achieved during a certain period of time.
Revenue Growth: -
• Revenue growth indicate towards sales increases/decreases over time. It is used
to measure how fast a business is expanding.
Cash Flow Growth: -
• Cash flow growth tells an investor how quickly a company is generating inflow
and outflow of the amount of cash or its equivalents from its business.
• It determines the amount of cash consumed or generated for a specified period
and also reflects the existing sources of the flow of cash along with a possible
scope of inflows.
Earnings Before Interest, Taxes, Depreciation, and Amortization
(EBITDA) Growth: -
• It is the alternate method of measuring profitability in net income. It attempt
to display cash profit that is generated by the company's operations.
• Companies use it extensively to compute their business’ performance in terms
of finances.
EBITDA Coverage Ratio (or EBITDA-to-interest coverage ratio): -
• This parameter examines if the pre-tax income would be enough to pay off the
firm’s interest-oriented expenses. This is used to assess a firm’s financial
capability.
• If this parameter is greater than 1 or 1, it suggests that the firm is financially in
a sound position and capable of repaying its liabilities.
CAGR – Compounded Annual Growth Rate: -
• CAGR shows cumulative performance of a particular variable over a significant
period of time and is used to measure the relative profitability of businesses.
• In other words, CAGR, is the mean annual growth rate of an investment over a
specified period of time longer than one year. It represents one of the most
accurate ways to calculate and determine returns for individual assets,
investment portfolios, and anything that can rise or fall in value over time.
• For a Company with a track record of over five years, you may consider a CAGR
of 10%-20% to be good for sales.

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 Valuation
PE Ratio: -
• Price to Earnings Ratio is the ratio of share price of a stock to its earnings per
share (EPS). It provides indication whether a stock at its current market price
is high or cheap.
• Its price to earnings ratio. If PE = 20 means giving 20 rupees to earn 1 rupee.
Lesser is better here.
• Ideally it should be around 20.
PB Ratio: -
• Book Value means the price of that stock which can be sold right now. If PB = 4
it means that current price is 4 times higher than market price. Lesser is better.
• In other words, Price-to-book value (P/B) is the ratio of the market value of a
company's shares (share price) over its book value of equity.
PS Ratio: -
• The price to sales ratio (Price/Sales or P/S) is calculated by taking a company's
market capitalization (the number of outstanding shares multiplied by the
share price) and divide it by the company's total sales or revenue over the past
12 months. 1 The lower the P/S ratio, the more attractive the investment.
Dividend Yield: -
• It is the measures of quantum of cash dividends paid out to shareholders
relative to the market value per share. Higher is better but between 2% to 6% is
a good number.
Face Value: -
• The Face Value of a share is determined by dividing a company’s net value,
which is the contrast between its asset and liabilities by the total number of
issued shares.

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 Financial Ratios
Interest Coverage Ratio: -
• It is used to see how easily a firm can pay the interest on its outstanding debt.
Therefore, a higher interest coverage ratio indicates stronger financial health.
Should be within 1.5 to 2 and above.
Quick Ratio: -
• The quick ratio measures a company's capacity to pay its current liabilities
without needing to sell its inventory or obtain additional financing. The quick
ratio is considered a more conservative measure than the current ratio, which
includes all current assets as coverage for current liabilities.
• The quick ratio is considered conservative because it offers short-term insights
(about three months), while the current ratio offers long-term insights (a year
or longer).
Current Ratio: -
• It is the ratio of Current asset / Current liability. It should be anywhere between
1.2 to 3. Higher is better.
Debt to Equity Ratio (2-2.5): -
• Means how much debt is taken towards its shareholding values. Equity means
ownership of the shares.
• The debt-to-equity ratio (D/E ratio) depicts how much debt a company has
compared to its assets. It is calculated by dividing a company's total debt by
total shareholder equity. Note a higher debt-to-equity ratio states the company
may have a more difficult time covering its liabilities.
Earning Power: -
Earning power compares a company's income to its total assets. The basic earning
power ratio (BEP) includes non-operating income, such as dividends. The formula for
BEP is earnings before interest and taxes divided by total assets. BEP is similar to the
return on assets (ROA) metric.
Asset Turnover Ratio: -
• Asset turnover is the ratio of total sales or revenue to average assets.
• This metric helps investors understand how effectively companies are using
their assets to generate sales.
• It can be used to compare similar companies in the same sector or group.
Inventory Turnover Ratio: -

• Inventory turnover measures how efficiently a company uses its inventory by

dividing the cost of goods sold by the average inventory value during the period.

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 • Inventory turnover ratios are only useful for comparing similar companies and
are particularly important for retailers.
• A relatively low inventory turnover ratio may be a sign of weak sales or excess
inventory, while a higher ratio signals strong sales but may also indicate
inadequate inventory stocking.

Analys Rating (All As in tickertape)

Ownership
MF Holding Change – 3M
Promoter Holding Change – 3M
Domestic Institutional Holding
DII Holding Change – 3M
Foreign Institutional Holding
FII Holding Change – 3M
Insurance Firms Holding
Mutual Fund Holding
Pledged Promoter Holdings
Retail Investor Holding
Promoter Holding
Strategy to select the stock.

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 Technical Parameter
Volatility: -
• Volatility is the standard deviation of a stock's annualised returns over a given
period.
• If the price of a stock fluctuates rapidly in a short period, hitting new highs and
lows, it is said to have high volatility.
• when the stock market rises and falls more than one percent over a sustained
period of time, it is called a volatile market. Higher volatility also means higher
risk.
• If a stock is ranked 10%, that means it has the potential to either gain or lose
10% of its total value. As an investor, you should plan on seeing volatility of
about 15% from average returns during a given year.
• “Volatility vs Nifty” means the difference between the annualised standard
deviation of the stock minus the annualised standard deviation of the Nifty.
ADX (Average Directional Index) Rating – Trend Strength: -
• It is a measure of strength or weakness of the trend regardless of whether
markets are moving up or down.
• ADX value is calculated over a 14 days period and ranges between 0 to 100.
o In falling stock price if ADX value moves above 25, it indicates that the
trend is strengthening, and prices will continue to fall.
o In rising stock price if ADX value moves above 25, it indicates continued
bullishness.
o An ADX value below 20 indicates no trend.
Relative strength index (RSI) – 14D (Varies from 0 to 100): -
• It is a measure of the speed and change of price movement over a 14-trading
day period to determine whether a stock is in overbought or oversold range.
• If the RSI is above 80, it is considered that a security is overbought zone or has
run up too much and might fall soon.
• if the RSI reading is below 20, it is considered that the security is oversold or
has fallen too much and might see price reversal soon.
Moving Average Convergence-Divergence (MACD) indicator: -
Moving average convergence divergence (MACD) is a trend indicator that is calculated
using difference between 12- and 26-day exponential price average (EPA). It tells you
the following.
• According to the relationship between two moving averages, determine the
current trend direction (bullish or bearish) and forecast where the price is more
likely to go.
• Calculate the rate of change in prices, often known as the trend's speed or
momentum. Retail traders, for example, can use the MACD momentum
readings to gauge the strength or weakness of a trend.
• The MACD indicator's simplicity is perhaps its strongest feature which provides
more relevant data for determining if the asset is worth buying or selling.

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 • However, it's important to realize that for the decision to purchase or sell,
Stochastic or RSI indicators with MACD should be used.
• Positive MACD line 1 values indicating short term uptrend in the stocks and
negative indicating that stock are in down trend.
Alpha (α):-
• Alpha in the stock market is widely used to track the active return generated by
an investment, along with the degree of volatility (risk) of a stock. It is a measure
of risk involved with an investment and, hence, its profitability.
• For example, suppose an investment have generate a 10% return during a given
period, whereas the benchmark index value during the same time yields returns
at 8%. Consequently, alpha stocks can be calculated as 2% (10% – 8%) as it
indicates the excess returns of a fund over its corresponding index value.
• While a positive (+ive) alpha means that a particular asset/portfolio has
outperformed the market, a negative (-ive) alpha value depicts a lower yield
generated when compared to returns of a benchmark index.
• It is widely used in modern portfolio theory, along with Sharpe ratio, beta,
standard deviation, and R-squared.
Sharpe Ratio: -
• Sharpe Ratio measures the risk-adjusted returns of an investment. The risk-
adjusted returns are the returns earned by an investment over the returns
generated by any risk-free asset such as a fixed deposit. However, higher
returns indicate extra risk.
• Higher Sharpe Ratio means greater returns from an investment but with a
higher risk level. Therefore, it justifies the underlying volatility of the funds.

Beta (β):-
• Beta is the coefficient of variation of a stock demonstrating the rate at which the
value of security changes in response to market movements.
• A stock having a beta coefficient higher than 1 is a risky investment venture.
Such a value indicates that the corresponding share is likely to demonstrate
high fluctuations corresponding to the stock market moment.
o β > 1 shows a high degree of responsiveness with stock market
fluctuations and delivers substantial returns on total investment with
high risk factor. Any dip in benchmark index points leads to a severe fall
in the value of corresponding stocks in lack of financial backing.

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 o β < 1 shows relative stable of a stock and has less effect of stock market
fluctuations.
o β = 1 Large-cap companies have a beta value of 1, as it is the primary
constituent of major benchmark indices operating in the country.
o β = 0 No risk like government bonds, fixed deposits, cash, etc.
o β < 0 means inverse relation with stock market. In the event of drastic
stock market fluctuation or crash, investors often pool their money in
these securities for higher returns. Gold is a significant example of such
investment tool having a negative beta, as its value tends to rise over
time.
Exponential Moving Average (EMA): -
• It is used for evaluating the bullish and bearish trends in securities over a
certain span of duration.
• EMA tracks changes in the price of a financial instrument over a certain period
having more emphasis on recent data points like the latest prices (SMA-Simple
Moving Average).

Parabolic SAR (Stop and Reverse) Indicator: -

• This indicator is used to determine trend direction and potential reversals. The
time frame is key to this method; wider the time-frame, better and more
accurate the prediction.
• The parabolic SAR is a trend-following indicator and used to determine the
direction of a security’s momentum and the point at which this momentum
might switch direction.
• The PSAR indicator appears in technical charts as a series of dots situated either
above or below candlestick bars. When PSAR dots appear below the price line,
it is considered to be a bullish signal — meaning that the uptrend will continue

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 for a while. However, when they are above the price line, it implies that the
sellers in the market are in control and that the downward trend would hold for
some time.
Accumulation Distribution (AD) Line: -
• It is a volume-based indicator to measure the cumulative flow of money into
and out of a security. Negative percentage change in A/D line suggests selling
or a bearish trend in stock price and vice-versa.
• Percentage change in A/D point is calculated as the percentage difference in
A/D points over a 1-week period. So, if the current A/D number is 100 and the
A/D number 1 week ago was 85, percentage change in A/D is (100/85) – 1 =
17.64%.

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