The Nifty is trading at a PE multiple of 22, which makes it reasonably valued considering the historical PE multiples at which it has traded earlier. Whenever the market is reasonably valued, it gives investors a good investment opportunity.
In this article, we discuss some of the characteristics of companies that have generated great wealth for shareholders as compared to other companies that have either been de-rated or not appreciated as much. We use the past 10 years of data to study the performances of the top 500 publicly listed companies.
For wealth creation, investors should look out for three metrics: return on capital, growth in sales and earnings, and reasonable valuation. The earning potential can be influenced by many factors such as changes in sales, changes in cost structure, tax efficiency, better capital allocation, etc. For an investor, the most important parameter which captures many business efficiency factors is the return on equity (ROE) or return on net worth (RONW), which is provided by many database providers. This is a standardised ratio that is calculated as net profit divided by the total shareholders' fund.
This ratio indicates the return generated by the company over the capital obtained from the shareholders and is one of the good indicators to quantify business performance. The shareholders' fund is defined as equity capital invested plus all reserves and surpluses of the company generated through its years of operations. The ROE can be used in comparing companies across various sectors. A change in ROE can be caused by a combination of any of the factors such as a change in the profit margins, capital turnover, financial cost ratio, financial structure ratio and change in tax structure.
Denne historien er fra April 08, 2024-utgaven av Dalal Street Investment Journal.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
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Denne historien er fra April 08, 2024-utgaven av Dalal Street Investment Journal.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
Allerede abonnent? Logg på
How Much Salary To Invest in Mutual Funds?
Mutual funds can be the cornerstone of your financial success. By understanding their benefits, aligning them with your goals and investing consistently, you will be well on your way to achieving your financial dreams. The article highlights how you can use mutual funds to make your dreams come true
Witnessing a Slow Turn
The information technology (IT) and business process management (BPM) sector has emerged as a major driver of growth for the Indian economy, playing a crucial role in boosting the country's GDP and enhancing public welfare.
On the Move
FY 2023-24 was a year of record results and growth for the tourism industry, driven by favourable demographics, increasing employment, higher disposable incomes of a young middle class, robust domestic demand, increased investments and improving infrastructure and connectivity.
Maintaining Profitable Fitness
Healthcare has emerged as one of India's most expansive and significant sectors, both in terms of revenue and jobs. It includes hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance and medical equipment.
High Potential for Wealth Generation
India's financial sector is highly diverse and rapidly expanding, marked by strong growth from existing financial services firms and the entry of new entities.
Focusing on Rural Markets
The Indian fast-moving consumer goods (FMCG) sector, the fourth-largest in the country, is a key driver of economic growth, consumption and job creation.
Painting a Promising Picture
The electrical industry is projected to reach a whopping USD 520 billion by 2025, driven by a surge in demand for electronic products expected to hit USD 400 billion by 2025, up from USD 33 billion just a few years ago (FY20).
A Rising Demand Curve
The consumer durables industry is categorised primarily into two segments by product categories: major appliances and small domestic appliances.
Urbanisation Triggers Tremendous Growth
India's construction material sector is a cornerstone of the nation's economic growth, propelling infrastructure development and generating significant employment.
On a High-Growth Trajectory
The Indian chemical sector is a major contributor to the nation's economic engine, contributing 7 per cent to the GDP. Encompassing a diverse range of products from bulk chemicals and fertilisers to speciality chemicals, petrochemicals and polymers the industry caters to various downstream sectors.
