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How to do a fundamental analysis of stocks?



Investors make investment decisions on the basis of technical analysis and fundamental analysis. Here, we will learn how to do fundamental analysis using financial statements, and financial ratios and take valuable insights from them.

Industry analysis

To understand a company’s potential, it’s crucial to study the industry in which the company operates to get valuable insights into its growth prospects, risk, and competition.


  • GDP contribution growth of the industry.
  • Competitive landscape
    • Number of competitors
    • Market size
  • Barrier to entry


Company analysis includes evaluating the company’s business. This includes-

Management discussion and analysis

Companies upload insights from their general meetings periodically. These meetings include their growth strategies, market conditions, risks, etc which can be useful to evaluate a company. Some key points to consider are:

  • Various segments the company operates in
  • A major source of revenue
  • Potential
  • MOAT (Ability of business to maintain a competitive edge over its competitors.)
  • Growth prospects
  • Risks
  • Business strategies

Shareholding pattern analysis

The shareholding pattern of a company gives valuable insights into ownership and the level of control within the company. This includes FIIs, DIIs, the Public, and promoters.

An increase in FIIs and DIIs stake ideally indicates their confidence in the growth potential of the company. Similarly, a decrease in their stake could be due to several factors. It is ideally a matter of concern. 

Consolidated financial statements

Financial statements of a company include income statements, balance sheets, and cash flow statements. These documents provide a comprehensive overview of the financial position of the company.


The income statement of a company summarizes all incomes and expenditures over some time. It enables investors to evaluate the company’s operations. Here, is how you can use an income statement to evaluate a company.

  • Revenue: Increasing revenue is generally considered as a positive signal as it indicates an increase in demand for the product that leads to an increase in sales. It can be influenced by the increase in the price of the product or volume of sales.
  • Operating expenses:  Expenses include raw materials, salaries, rent, etc. An increase in operating expenses as a percentage of revenue can affect operating profit margin and net profit. Similarly, stable expenses indicate that the company’s expenses are well controlled and it leads to profitability.
  • Profit after tax (PAT): Increasing PAT is a positive signal as it indicates that the company is generating more profit after accounting expenses.

Positive signals while evaluating income statements include an increase in revenue, an increase in PAT, and a stable/decrease in expenses concerning revenue.


The balance sheet reports the company’s assets, liabilities, and equity showing how the company’s resources are financed and allocated. It represents the financial position of the company. To evaluate a company using a balance sheet, we can analyze various components.

  • Assets: Increase in assets is generally considered a positive signal as it indicates that the company is expanding, and diversifying which leads to growth.
  • Liabilities: A decrease in debt is considered a positive signal as it indicates that the company is decreasing its financial obligations and improving its financial health. However, a significant decrease in debt without a corresponding increase in assets could indicate a lack of investment growth and less creditworthiness.
  • Shareholder’s equity: Positive shareholder’s equity represents the net worth of the company. An increase in FIIs, DIIs, and Public stake is a positive signal as it indicates that company value is increasing. Shareholders have confidence in the potential growth of the company.

Total assets more than that of Total liabilities, i.e. total assets > total liabilities, is a positive signal. However, a constant increase in debt is generally considered a negative signal.


Cash flow statements provide information about the inflows and outflows of the cash within the company over a specific period of time. It is a summary of the allocation of funds in operating, investing, and financing activities.

  • Operating activities: This shows the cash generated from the company’s core operations. An increase in cash flows from operating activities can be a positive signal, as it indicates efficient and effective management and profitability. However, a decrease in cash flow from operations can be a negative signal as it indicates issues with sales, cost, management, and profitability.
  • Investing activities: It assesses the company’s cash related to investments in assets. A stable/ increase in cash inflows can be a positive signal as it indicates the selling of investments and having effective disinvestment strategies. When more percentage of profit is re-invested in the company, it indicates a positive signal. However negative signals may include outflows for investments without corresponding cash inflows, which suggests potential cash drains or over-investment.
  • Financing activities: cash outflows indicate that the company is retiring debt and paying out dividends which might be a positive signal for investors. However, cash inflow indicates issuing stock or debt, which boosts asset levels.

A positive balance of net cash generated indicates the company’s ability to generate cash and meet its financial obligations while a negative balance indicates liquidity Challenges the Company is facing.

Financial ratios

Financial ratios are the quantitative tools used to evaluate a company’s financial position. They provide means to compare different aspects of a company’s financial statements. Investors use financial ratios to make informed decisions about a company’s liquidity, profitability, and solvency.

Earnings per share (EPS)

EPS is used to analyze the profitability of the company.

EPS= Profit after tax (PAT) / Number of outstanding shares.

Increase in EPS: An increase in PAT is considered as a positive signal as it indicates the company is generating more profits and a decrease in outstanding shares indicates a buyback of shares, which boosts EPS.

Decrease in EPS: A decrease in PAT is considered a negative signal as it indicates a decline in net income and an increase in outstanding shares indicates that the company sells more shares to the public which dilutes EPS unless newly issued shares generate significant profits.

A steady EPS is considered optimal. However frequent ups and downs can be a negative sign.

Price to earnings ratio (PE ratio)

PE ratio is used to analyze the valuation of a company’s stock. It suggests whether the stock is undervalued or overvalued, i.e. how much value investors are ready to pay for Rs 1 of the company’s earnings. Always compare PE with its peers.

PE ratio = Last traded price / EPS

When the company’s PE ratio is low, the stock is relatively undervalued, allowing investors to acquire the company’s earnings at a lower price. Conversely, when the PE ratio is high, indicating an overvalued stock, investors are paying a premium to purchase it. It also suggests investors’ expectations for the company’s growth.

 An increase in a company’s earnings indicates consistent growth and financial stability of the company which results in higher PE. However, the decline in earnings can be a concern about the growth and financial stability of the company, which leads to lower PE.

 Debt to Equity ratio

It represents the comparison between the debt and equity of the company. The ideal ratio is 2:1.

An increase in the ratio indicates an increase in debt, which is considered a negative signal. This suggests a higher dependency on loans which increases finance costs. A decrease in the ratio significantly suggests the low creditworthiness of the company, which again indicates a negative signal.

A lower ratio also indicates that the company relies less on borrowed funds and has a stronger financial position, which suggests better stability. A stable debt-to-equity ratio is considered optimal.

Interest coverage ratio

It represents the company’s ability to generate enough operating income to cover finance costs.

Interest coverage ratio = Earnings before interest and taxes / Interest expenses.

A higher ratio indicates that the company is capable of meeting finance costs, however, a lower ratio suggests the company may have difficulty in retiring its debt.

Return on equity (ROE)

It represents the efficiency of the company in generating profits from shareholders’ investments. Always compare ROE with its peers.

ROE = Total profit / Total equity

High/ Increasing ROE: It suggests a positive signal as the company is generating significant profits from shareholder’s investment. Debt should not have an influence over ROE.

Low/ Declining ROE: It suggests a negative signal as the company is not generating significant profits from shareholders’ investments. It represents its poor financial performance.

An increase in ROE and profit indicates a positive signal. However, an increase in debt is a negative signal.

Current Ratio

It is a comparison between current assets and current liabilities. The ideal ratio is 2:1. If the company’s current ratio is less than 2:1, it indicates a negative signal. This suggests that the company challenging liquidity. The optimal ratio is considered to be more than 2:1.


Margins = Revenue / PAT

An increase in margins suggests an increase in revenue and PAT which indicates a positive signal however, a decrease in margins indicates a negative signal.

Key points to remember while fundamentally analyzing companies

  • Increasing Revenue
  • Higher Margins
  • Increasing EPS
  • Increasing PAT
  • Manageable debt
  • Higher interest coverage ratio
  • Higher ROE
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Infosys ADR Up 5% Despite Weak Results: What Should Indian Investors Do?



Hey investors! Let’s talk about Infosys and its recent ups and downs. Despite some not-so-great results, their ADR (American Depositary Receipt) is up by 5%. It’s a bit of a head-scratcher, right? So, what should you, as an Indian investor, do in this situation? Let’s break it down.

The Latest with Infosys

  • ADR Up by 5%: Even though the results weren’t strong, Infosys’ ADR went up. It seems like the market had already anticipated this, and maybe some short sellers got caught off-guard.
  • Q3 Results: The revenue barely budged, and net profit actually fell by 7% compared to last year. Not the best news, honestly.
  • In Semi Acquisition: A big move by Infosys, acquiring In Semi, a big name in semiconductor design and embedded services. This could be a game-changer in the long run.

Analyzing the Numbers

  • Profit and Revenue: The net profit is down, and revenue growth is almost flat. High interest costs are partly to blame here.
  • New Deals Dropped: New deal signings took a nosedive from $7.7 billion to $3.2 billion. That’s a big drop.
  • Attrition Rate: Good news here – it’s down to 12.9%. Less employee turnover is always a positive.
  • Guidance for FY24: Infosys expects revenue growth of 1.5%-2.0% and an operating margin of 20%-22%.

What’s the Deal with Insemi?

Insemi’s acquisition is quite a highlight. They’re leaders in the semiconductor design space. This market is booming and expected to hit $800 billion by 2028. With Insemi, Infosys could become a significant player in this field.

The Mixed Bag

  • Sector and Geographic Performance: Financial services and North America are still not performing well, but there’s some rebound in Europe.
  • Cash Flow: Infosys has a healthy free cash flow, which is a good sign for its financial health.

So, What Should You Do?

  1. Understand the Big Picture: Look beyond just this quarter. Infosys is making moves that could pay off in the long run, especially with the Insemi acquisition.
  2. Diversification: Don’t put all your eggs in one basket. It’s crucial to have a diversified portfolio.
  3. Stay Updated: Keep an eye on how Infosys performs in the coming quarters, especially in their new ventures and market segments.
  4. Risk Assessment: Be aware of the risks involved. Infosys is facing some challenges, and you need to decide if you’re comfortable with that level of risk.

Final Thoughts

Infosys’ results were a mixed bag, and the stock’s reaction was a bit surprising. As an investor, it’s essential to stay informed and make decisions based on a comprehensive understanding of the company’s performance and potential. Keep watching the market and adjust your strategy as needed. Remember, investing is a marathon, not a sprint!

Since we talked about this IT giant Infosys, Lets explore some AI based companies as well.

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Edelweiss NCD Issue: Secure Investment Opportunity



Edelweiss Financial Services Limited has announced a public issue of Secured Redeemable Non-Convertible Debentures (NCDs) worth Rs 2,500 million, offering an effective yield of up to 10.46% per annum. With credit ratings from CRISIL A+/Stable and ICRA A+, these NCDs provide a safe investment avenue.

Issue Details and Tenures

The NCDs offer ten series with fixed coupons and tenure options of 24, 36, 60, and 120 months, presenting diverse interest payment frequencies. The effective annual yield for these NCDs ranges from 8.94% to 10.46% per annum, catering to different investment preferences.

Offering Timeline and Utilization of Funds

Scheduled to open on January 9, 2024, and close on January 22, 2024, at least 75% of the raised funds will be directed towards repaying/prepaying existing borrowings, ensuring financial stability. The remainder will support general corporate purposes, aligning with SEBI NCS Regulations.

Investor Incentives and Ratings

Investors holding debentures/bonds from the company or related entities may enjoy an additional incentive of up to 0.20% p.a. These NCDs carry ratings of CRISIL A+/Stable and ICRA A+, indicating stability despite negative implications.

Lead Managers and Listing

Trust Investment Advisors Private Limited and Nuvama Wealth Management Limited are the lead managers for this NCD issue, aiming to list the NCDs on BSE Limited. This listing will provide liquidity and ease of trading for investors.

About Edelweiss Financial Services Limited

Edelweiss Financial Services Limited, established in 1995, operates in investment banking and holds a prominent position in the financial sector. Starting as an investment banking firm, it later expanded its operations, reflecting strong credentials in financial services.

Edelweiss Financial Services Limited has unveiled a lucrative investment opportunity through its NCD issue, promising secured returns and prudent utilization of funds. As the issue opens for subscription, it’s an opportune moment for investors seeking stable yet high-yield investment avenues. With a diversified range of tenure options and regular interest payments, this offering aligns with different investor preferences. The company’s extensive experience in the financial sector adds credibility to this investment opportunity, promising reliable returns.

Key Takeaways

  • Lucrative Investment Avenue
  • Secured, High-Yield Returns
  • Diverse Tenure Options
  • Prudent Utilization of Funds

This blog introduces an investment opportunity provided by Edelweiss Financial Services Limited, shedding light on its NCD issue’s specifics and the company’s background. With its high yield and secure nature, this offering presents a compelling choice for investors seeking stable returns. Learn more about financial goal planning.

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Allcargo Terminals Hits 20% Upper Circuit: Stock Analysis



Allcargo Terminals Limited has recently hit the headlines with its stock price soaring to a 20% upper circuit. This remarkable surge raises an intriguing question: can we expect this rally to continue? Let’s dive into the company’s recent performance and sector trends to uncover insights. The upper circuit today was followed by a trendline breakout, shared by a user on twitter a few days ago.

The Catalyst Behind the Surge

Allcargo Terminals’ stock hitting the upper circuit is not just a random spike; it’s backed by solid performance and strategic moves. The company’s recent financial results for Q2FY24 show a robust 13% year-on-year increase in Container Freight Station (CFS) volumes, outpacing industry growth. But what does this mean for the stock’s future trajectory?

Analyzing Q2FY24 Performance

In Q2FY24, Allcargo Terminals demonstrated strong sequential improvement. The company not only witnessed a 6% quarter-on-quarter increase in CFS volumes but also reported revenue growth of 3% and a notable 12% increase in EBITDA. These figures indicate a positive momentum, which could be a key factor in driving the stock’s rally.

Digital Initiatives and Customer Experience

A significant aspect of Allcargo Terminals’ strategy is its focus on digital initiatives aimed at enhancing customer experience. This progressive approach is gaining traction, potentially contributing to the ongoing volume momentum. Such forward-thinking strategies are crucial in determining whether the rally has the legs to continue.

all cargo terminal analysis

Leadership and Financial Health

The induction of Mr. Pritam Vartak as CFO marks a strategic strengthening of the leadership team, potentially boosting investor confidence. Furthermore, the company’s robust balance sheet and net debt-free status provide a solid foundation for sustainable growth, which could be pivotal in maintaining the rally.

Allcargo Terminals in the Wider Logistics Sector

Allcargo Terminals, with its extensive network and digital prowess, is well-positioned in the logistics sector. As the industry navigates through a period of transformation, ATL’s innovative approach and strategic expansions could play a crucial role in sustaining its market rally.

The Road Ahead: Predicting the Rally’s Course

While Allcargo Terminals’ recent performance is impressive, predicting the stock market is always a complex endeavor. Factors such as broader market trends, economic conditions, and company-specific developments will influence the stock’s trajectory.

In conclusion, Allcargo Terminals Limited’s recent upper circuit hit reflects its strong performance and strategic initiatives. While the current indicators are positive, the sustainability of the rally will depend on continued performance excellence and favorable market conditions. What’s your take on Allcargo Terminals’ future in the stock market? Let’s engage in a discussion about the exciting possibilities ahead for this dynamic company! 🚀💹📈

We like Adani ports as well in the shipment and cargo field. Keep following us for more such technical analysis.

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