Let’s study some Indian footwear companies and do a detailed quantitative analysis, we have selected the following companies for study and analysis (the companies are selected on the basis of market cap, the top 7 companies of that sector according to market cap): –
- Bata India
- Relaxo Footwears
- Mirza International
- Liberty Shoes
- Superhouse Group
|Sr. No.||Company Name||Market Cap (Rs. Crore)|
|1||Bata India vs Relaxo Footwears||14,542|
|2||Bata India vs Relaxo FootwearsBata India vs Relaxo Footwears||9,076|
This analysis is done with the only purpose of screening out good companies. Analysis done is completely on quantitative basis. No suggestions are being made to directly go and invest in the top scoring companies of this analysis.
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.
Bata India vs Relaxo Footwears have just become mid cap companies. And all the others (Mirza International, Khadim’s, Sreeleathers, Liberty Shoes & Superhouse Group) are small cap companies. The analysis of these companies is going to be based on the following parameters. They are as follows: –
- What is PE Ratio
- What is ROCE (Return on Capital Employed)
- What is ROE (Retuen on Equity)
- Debt to Equity Ratio (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 7, where 1 being the least and 7 being highest score. (total number of companies taken here are 7, that’s why the mentioned scoring card)
|Sr. No.||Company Name||PE Ratio||Rank||Score|
|1||Bata India vs Relaxo FootwearsBata India vs Relaxo Footwears||56.26||7||1|
|2||Bata India vs Relaxo FootwearsBata India vs Relaxo Footwears||51.26||6||2|
What is 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 7 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.
|Sr. No.||Company Name||ROCE||Rank||Score|
|1||Bata India vs Relaxo FootwearsBata India vs Relaxo Footwears||25.43%||2||6|
|2||Bata India vs Relaxo Footwears||29.63%||1||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.
Relaxo Footwears has the number 1 rank and scored 7 points. And Superhouse Group has the lowest rank (7th) and scored 1 point.
|Sr. No.||Company Name||ROE||Rank||Score|
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.
Here too, Relaxo Footwears ranked 1st as it had the highest ROE and thus scored 7. And Superhouse Group again ranked 7th as it had the lowest ROE and thus scored 1.
|Sr. No.||Company Name||DE Ratio||Rank||Score|
A lower Debt to Equity Ratio (DE Ratio) means that the company doesn’t require debt for its growth or for its working capital. That is the debt component of that company is very low and it can run its operations smoothly using the existing equity or reserves & surplus.
The company which has the highest DE ratio has the least score and the company with lowest DE ratio has the highest score.
Bata India & Sreeleathers being a 0-debt companies have scored 7. Superhouse Group has the highest DE ratio and has thus scored 1.
5 Years Growths
|Sr. No.||Company Name||5 Years Sales Growth||Rank||Score|
|Sr. No.||Company Name||5 Years Net Profit Growth||Rank||Score|
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.
Sreeleathers has scored 7 in 5 Year Sales Growth and Relaxo Footwears has scored 7 in 5 Year Net Profit Growth, as they have the highest 5 years sales & net profit growth.
And Khadim’s has scored 1 in 5 Year Sales Growth as its data is not available and Superhouse Group has scored 1 in 5 Year Net Profit Growth as it has the lowest 5 net profit growth.
|Rank||Company Name||Final Score|
Bata India vs Relaxo Footwears is on the 1st position with 34 points, Sreeleathers on 2nd with 31 points, Bata India vs Relaxo Footwears on 3rd with 27 points and Superhouse Group is on the last position, that is 8th with just 13 points. Relaxo Footwears obviously scored well has it has very good fundamentals.
Even though Sreeleathers is a small cap company, it still look very good in all parameters. Having ‘0’ D/E ratio for a small cap company is very good as it will have nice potentials of growths.
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)