Parameters to check before buying a stock

Below are the parameters that I check before investing in a stock:

Market Cap (in Cr)
Category of stock (Fast grower, slow grower, cyclical etc)
Current PE (<40)
Median PE
Long term chart pattern (up/down/sideways)
Stage analysis (1,2,3 or 4)
Sales growth (CAGR 3years>12%)
Net Profit growth(CAGR 3years>10%)
Debt to equity < 0.7
Retail Public Holding < 25%
Promoter holding <=75%
PEG ratio < 1.5
P/B < 1.5 (for B2B)
Gross Profit Margin (steady)
Operating Profit Margin (steady or increasing)
Interest coverage ratio (>5)
ROE (>15% (3 years))
Share price graph (upward)
Promoter pledge(<5%)
Revenue growth > 10% (over 5 years)
45<RSI<75 (RSI<30 means oversold, >75 means overbought)
ROCE (>20%, 3 years)
CFO/EBITDA (60% +)(Check for 1,3,5 years)
CFO/PAT (>90%,higher the better)
Contingent liability as a % of net worth/equity (<5%)
Concalls conducted regularly
Goodwill as a % of total assets (<20%)
Auditor’s report : Clean?
Company misallocating capital?
Dividends paid regularly?
Micellaneous expenses as percentage of other expenses (<6%)
Auditor resigned?
Total asset turnover (last 5 years)
Net fixed assets turnover (last 5 years)
Estimated revenue growth
Discrepancy in remunerations of the management
Trade receivables as a percentage of sales (<20%)
Working capital days decreasing?
ADX (>25 on Tradingview)
Vstop (Green, upwards (Weekly/Monthly) on Tradingview)
Relative Strength (RS > 80 on Market Smith)
Read Valuepickr thread


Median PE for 3 or 5 years?

Promoter holding kei less than 30 APL also so it’s doesn’t plz focus on business not holding. Dividend doesn’t matter also

Yes. You can compare with the long term median PE.

Regarding promoter holding, reasonable holding indicates confidence by the promoters in their company. There could be exceptions though. Dividend being paid regularly indicates good intent of the management towards the share holders.

Last year I discover kei but it was pledge by promoter and holding also less than 40 so I avoid.i don’t think how was the great business that company,so I miss the 4x stock.just for a wrong theory.

Few Tips I learnt:

  1. Having philosohy and approach to study the business of a stock is more important than just viewing those finanacial metrics and ratios in isolation. So probably try drafting your own Stock research methodology is helpful
  2. Trends tell more stories than just a figure.
  3. Analyze the Character of the business like Profitability, scalability, Ways the company does cash generation and consumption
1 Like