This analysis is done with the only purpose of screening out good companies. No suggestions are being made to directly go and invest in the top scoring companies of this analysis.
Let’s study some auto ancillary companies, we have selected the following companies for study and analysis: –
- Motherson Sumi
- Exide Industries
- Wabco India
- Amara Raja Battery
- Varocc Engg.
- Minda Industries
|Sr. No.||Company Name||Market Cap (Rs. Crore)|
|6||Amara Raja Battery||12,662|
The top 100 companies according to the market capitalization are called as the large cap companies. Companies from 101 to 250 (based on market capitalization) are the mid-cap companies and the rest, that is above 250 are the small cap companies.
Bosch and Motherson Sumi are the large cap companies. Exide Industries is a mid-cap company. And the rest of the companies, Endurance, Wabco India, Amara Raja Battery, Varocc Engg., Minda Industries, are all small cap companies.
The analysis of these companies is going to be based on 6 parameters. They are as follows: –
- Price-to-Earnings (PE) Ratio
- Return On Capital Employed (ROCE)
- Return On Equity (ROE)
- Debt-to-Equity (DE) Ratio
- 5 Years Sales Growth
- 5 Years Net Profit Growth
These parameters play an important role in the analysis of any company. This does not mean that one should be dependent only on these, but these parameters are crucial for initial screening.
First, we have given the companies their ranks and then accordingly we have assigned scores to those companies from 1 to 8, where 1 being the least and 8 being highest score. (total number of companies taken here are 8, that’s why the mentioned scoring card)
|Sr. No.||Company Name||PE Ratio||Rank||Score|
|6||Amara Raja Battery||26.59||3||6|
PE ratio is nothing but what price an investor is paying for 1 rupee of earning.
The company which has the highest PE ratio has been given number 8 rank and the company which has the lowest PE ratio has been given number 1 rank.
But the company which has the highest PE ratio has been given the lowest score.
Wabco has the highest PE ratio and thus got number 8 rank and scored 1. Varocc Engineering has the lowest PE ratio and thus scored number 1 rank and a score of 8.
|Sr. No.||Company Name||ROCE||Rank||Score|
|6||Amara Raja Battery||24.92||2||7|
The company which has the highest ROCE has the highest rank and has also been given the highest points. And the company which has the lowest ROCE has the lowest rank and has also been given the lowest score.
Here too, Wabco has the number 1 rank and scored 8 points. Varocc Engineering, here too, has the lowest rank and scored 1 point.
|Sr. No.||Company Name||ROE||Rank||Score|
|6||Amara Raja Battery||16.73||6||3|
ROE has been analyzed on the same basis as ROCE.
The company which has the highest ROE has the highest rank and has also been given the highest points. And the company which has the lowest ROE has the lowest rank and has also been given the lowest score.
Minda Industries ranked 1st as it had the highest ROE and thus scored 8. Exide Industries ranked 8th as it had the lowest ROE and thus scored 1.
|Sr. No.||Company Name||DE Ratio||Rank||Score|
|6||Amara Raja Battery||0.02||4||5|
The company which has the highest DE ratio has the least score and the company with lowest DE ratio has the highest score.
Bosch, Exide Industries and Wabco being 0-debt companies have scored 8. Motherson Sumi has the highest DE ratio and has thus scored 1.
5 Years Growth – Sales & Profit
|Sr. No.||Company Name||5 Years Sales Growth||Rank||Score|
|6||Amara Raja Battery||15.41||4||5|
|Sr. No.||Company Name||5 Years Net Profit Growth||Rank||Score|
|6||Amara Raja Battery||10.04||5||4|
The company with the highest 5 Year CAGR in Sales and Net Profit get the highest rank and thus gets the highest score. And Vice-Versa.
Minda Industries has the scored 8 in both, as they have the highest 5 years sales & net profit growth. And Varocc Engineering has the scored 1 in both, as they have the lowest 5 years sales & net profit growth.
|Rank||Company Name||Final Score|
|3||Amara Raja Battery||30|
Minda Industries is on the 1st position with 39 points, Wavco India on 2nd with 34 points, Amara Raja Battery on 3rd with 30 points and Varocc Engineering is on the last position, that is 8th with 18 points.
Companies in the 1st four positions are all small cap companies. Also, as Bosch has secured a lower rank does not mean that it is a bad company even after being a large cap and a blue-chip company. Its just that according to the parameters selected here, Bosch has scored less.
The point here is to focus on the fundamentals of the company. Here, we have analyzed the company based on their current fundamentals. Also, the qualitative analysis of these companies will provide with a better outlook towards them
And quantitative analysis along with qualitative analysis will give a better understanding of which company is worth investing from here on.
- We are not, in any case, suggesting buying stocks of any of the companies mentioned above. We have just provided a study on these companies.
- All the data used is of Trailing Twelve Month (TTM)