Appreciate your efforts in trying to come up with a framework for analysing the performance of different companies. Also, good to see the initiative you’re taking to understand different sectors/industries in multiple threads.
My investing career is barely a couple of years old so you can totally choose to ignore my comments/advice. But I thought maybe I can share some of my thoughts which may put things in a different perspective for you.
Apart from a pure undervaluation/asset play/value unlocking investment strategy, every single company you invest in is totally based on your prediction of the future earnings of the company. Since stock prices are slaves of earnings. (Even for the undervaluation/asset play companies, any investment period lasting more than a few months ensures your thesis is based on the future earnings of that company remaining at least level with previous quarters/years - otherwise with reducing earnings it won’t remain undervalued for long )
Thus IMHO, I don’t think there exists/can exist any single framework involving numbers which can guarantee investment success. As any prediction of the future earnings requires putting in numbers based on assumptions which may or may not be correct.
Having a template is useful and nice to reduce re-organisation of similar information across companies and for quickly calculating their PAST Financial Health. However, believe me markets will be positioning >90% companies based on their future and not their past.
And everyone knows why the future is so difficult to predict. Here’s some of the obvious reasons:
- Every country is unique with unique characteristics (Economic environment, GDP growth, Demographics, Fiscal deficit, government policies, etc)
- Every industry is unique with unique characteristics (Industry growth, Profit margins, Regulation, Compliance, Competitiveness, Customers, etc)
- Every company is unique with unique characteristics (Business Models/Moat, Top Management, Revenue growth, PAT growth, Debt level, etc.)
And this doesn’t even include the vagaries of the market in terms of assigning different multiples to industries/companies based on sentiment, news flow, govt regulation, promoter background, etc.
With so many unpredictable variables it is nigh on impossible to come up with any remotely correct ‘one size fits all’ valuation framework.
My idea for you would be to have a broad level understanding of the industry. Based on that, study the individual companies in significant detail right from quantitative factors to qualitative (more important) factors. As each company has certain unique characteristics, try and understand those unique factors which would make it a worthy investment. Bunching so many companies together on a spreadsheet will never highlight the qualitative factors which makes one company a significantly better bet than the other.