People love to buy stocks of fastest growing companies. In a more colloquial term we call such stocks as growth stocks.
Early inclusion of such stocks in investment portfolio ensure maximum returns.
Stock investors considers EPS growth rate as the most reliable indicator of growth.
When EPS of companies grow at a fast rate, they attract more investment.
Earning per share (EPS) is one financial parameter that has direct influence on market price of its stocks.
If EPS is growing, stock price will also rise at same rate. If EPS is diminishing, stock price will also fall at same rate.
What is EPS? Why it is the most tracked financial parameter of a company?
EPS is easy to understand. It is also the most important stock data (if not tampered).
No other financial parameter influences stock price more directly than EPS.
Every change in EPS is instantly reflected in market price of stocks. Hence as an investor, it is always advisable to keep an eye of historical EPS movements of a company.
Standalone EPS may not be as interesting, but historical EPS makes a lot of meaning.
Earning per share (EPS) breaks down net profit of a company (PAT) into per share value.
Suppose a company has PAT of Rs 5.0 Crore & its number of share outstanding is 1.0 crore nos. In this case its EPS will be Rs 5/share (Rs 5 crore/1crore).
EPS is any day more important than PAT (net profit) for investors. Its is a must look deeply into EPS history before investing.
PAT’s historical figures gives only a feel about the company. Real impact of PAT is felt by investors when it is converted in EPS.
The Impact of EPS growth on market price is more direct than PAT growth.
P/E ratio dictates stocks market price?
A reliable stock always maintains its P/E ratio. Ratio between market price and EPS is P/E ratio (PE = Price/EPS).
A reasonable P/E ratio for any stock is 15.
Keeping P/E as constant, formula for market price will be:
Market Price1 = 15 x EPS1.
Same formula with EPS growth rate (R) will like this:
Market Price2 = 15 x EPS1 (1+R).
So this way, if EPS is growing its market price will also appreciate.
For investors EPS history is everything?
After EPS, sales growth is another parameter that investors track the most. EPS is a product of companies profits (PAT). It is difficult for company to improve EPS if its sales turnover is not improving.
A typical formula for companies profit is: Sales x Profitability = Profit.
Considering a case where companies profitability remains constant at 10%. Lets incorporate this assumption in our formula and see how it evolves. Sales x 10% = Profit.
To improve companies Profit (PAT or EPS), companies sales must grow.
In business, fastest growing company are often graded in terms of its sales turnovers. Sales growth strategy is one of the most reliable and proven business strategy.
Companies which are able to increase its sales turnover year after year are likable. This liking becomes more dominant when sales turnover growth becomes fast.
Almost all good companies increase their sales every year. But companies with competitive moat do it faster than others. For these companies, increase in sales turnover represents market domination.
Not everyone can dominate the market. Only companies with exception product and astute management can achieve this feat.
Investors must keep a watch on sales growth figures of companies.
Additional check for fast growing companies
A portion of companies profit (PAT or EPS) is distributed a.s dividends to shareholders. The balance profit which remains with the company is called Reserves.
Companies reserves are declared in companies balance sheets. Investors like a continuously increasing Reserves. Growing reserves makes companies more self reliant.
A company which has huge reserves (like Hindustan Zinc) do not depend on debt to finance its working capital. Debt is a tool which temporarily improves companies cash flow. But in long run it increases companies expense and hence decreases companies profits. Sales – (Expense+ Interest on debt) = Profit.
Fastest Growing Companies in India 2017
(Updated on December’2017)
Long Term Growth
|SL||Company||Revenue Growth (3Y)||EPS Growth (3Y)||Book Value Growth (3Y)||Revenue Growth (5Y)||EPS Growth (5Y)||Book Value Growth (5Y)|
|2||Safari Industries (India) Ltd.||28.75||292.21||80||39.53||64.03||41.14|
|3||Ajanta Pharma Ltd.||17.96||29.36||38.24||23.97||45.62||39.33|
|4||Avanti Feeds Ltd.||34.16||44.93||52.41||47.35||46.42||43.01|
|5||Johnson Controls - Hitachi Air Conditioning India Ltd.||21.48||115.93||22.29||19.83||83.61||16.58|
|6||Minda Industries Ltd.||27.12||187.43||32.93||24.34||43.05||20.73|
|7||Page Industries Ltd.||21.5||20.08||32.07||25.05||24.23||32.05|
|8||Kovai Medical Center & Hospital Ltd.||16.31||36.05||32.22||18.77||38.05||30.91|
|9||Aksharchem (India) Ltd.||21.47||20.61||38.53||37.99||61.68||46.47|
|10||Natco Pharma Ltd.||39.83||64.89||28.73||31||48.73||25.22|
|SL||Company||Sector||Size of Company (M.Cap)||Market Cap (Cr)||ROE (%)||Operating Margin (%)||Debt Equity Ratio|
|1||Vakrangee Ltd.||Technology - Computer Software||Large||37,921.03||29.28||23.78||0.07|
|2||Safari Industries (India) Ltd.||Chemicals - Plastic Packaging goods||Small||1,276.37||10.31||6.81||0.44|
|3||Ajanta Pharma Ltd.||Healthcare - Drugs & Pharma||Medium||12,054.91||36.75||35.94||0.00|
|4||Avanti Feeds Ltd.||FMCG - Marine Foods||Medium||11,809.32||42.93||12.94||0.03|
|5||Johnson Controls - Hitachi Air Conditioning India Ltd.||Cons Durable - ACs & Refrigerators||Medium||6,899.82||20.34||8.77||0.14|
|6||Minda Industries Ltd.||Automobile - Auto Ancillaries||Medium||10,788.97||29.09||11.34||0.73|
|7||Page Industries Ltd.||Textiles - Cloth||Medium||24,889.76||44.54||20.61||0.13|
|8||Kovai Medical Center & Hospital Ltd.||Healthcare - Health Services||Small||1,423.10||29.36||24.84||0.54|
|9||Aksharchem (India) Ltd.||Chemicals - Dyes & Pigments||Small||564.30||47.45||32.85||0.24|
|10||Natco Pharma Ltd.||Healthcare - Drugs & Pharma||Medium||16,364.10||33.21||34.52||0.14|
|SL||Company||Sector||Size of Company (M.Cap)||Price||Market Cap (Cr)||Current PE||Current PB||PEG (5Y)|
|1||Vakrangee Ltd.||Technology - Computer Software||Large||720.00||37,921.03||59.18||16.56||0.44|
|2||Safari Industries (India) Ltd.||Chemicals - Plastic Packaging goods||Small||630.00||1,276.37||95.85||8.09||1.50|
|3||Ajanta Pharma Ltd.||Healthcare - Drugs & Pharma||Medium||1,390.85||12,054.91||24.94||6.70||0.55|
|4||Avanti Feeds Ltd.||FMCG - Marine Foods||Medium||2,692.00||11,809.32||30.44||13.85||0.66|
|5||Johnson Controls - Hitachi Air Conditioning India Ltd.||Cons Durable - ACs & Refrigerators||Medium||2,536.00||6,899.82||87.52||13.89||1.05|
|6||Minda Industries Ltd.||Automobile - Auto Ancillaries||Medium||1,262.55||10,788.97||49.54||9.32||1.15|
|7||Page Industries Ltd.||Textiles - Cloth||Medium||22,560.05||24,889.76||83.24||32.50||3.44|
|8||Kovai Medical Center & Hospital Ltd.||Healthcare - Health Services||Small||1,365.55||1,423.10||23.00||5.36||0.60|
|9||Aksharchem (India) Ltd.||Chemicals - Dyes & Pigments||Small||684.95||564.30||13.46||2.54||0.22|
|10||Natco Pharma Ltd.||Healthcare - Drugs & Pharma||Medium||971.50||16,364.10||29.72||9.04||0.61|
Long Term Returns
|SL||Company||Sector||Size of Company (M.Cap)||3-Year Return||5-Year Return||10-Year Return|
|1||Vakrangee Ltd.||Technology - Computer Software||Large||72.45||67.35||54.61|
|2||Safari Industries (India) Ltd.||Chemicals - Plastic Packaging goods||Small||54.2||65.85||54.98|
|3||Ajanta Pharma Ltd.||Healthcare - Drugs & Pharma||Medium||13.15||68.34||60.77|
|4||Avanti Feeds Ltd.||FMCG - Marine Foods||Medium||94.77||142.44||77.69|
|5||Johnson Controls - Hitachi Air Conditioning India Ltd.||Cons Durable - ACs & Refrigerators||Medium||47.43||82.03||33.21|
|6||Minda Industries Ltd.||Automobile - Auto Ancillaries||Medium||118.57||94.94||39.54|
|7||Page Industries Ltd.||Textiles - Cloth||Medium||32.81||46.12||49.11|
|8||Kovai Medical Center & Hospital Ltd.||Healthcare - Health Services||Small||38.62||51.19||35.67|
|9||Aksharchem (India) Ltd.||Chemicals - Dyes & Pigments||Small||57.58||101.72||47.78|
|10||Natco Pharma Ltd.||Healthcare - Drugs & Pharma||Medium||50.94||60.48||42.7|
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