Great start! As you very succinctly put it, it's time to leap to the next level. I have been currently compiling data for last 10 years on "high quality businesses" to understand
1) what attributes make a any business high quality of A+ category business
2) How rewarding it is to pay up for high quality businesses. How do they behave in a buoyant market and in a lackluster market.
Though, I am still compiling more data, here are some inferences from the analysis of the data compiled so far! I think there are few factors which are "must have" for a business to be qualified as A+. Of course, it goes without saying that high ROE/ROCE; free cash flow, low leverage etc are required as such.
1) Inherent strength of high quality business enables it to operate business with least capital deployed. All the companies which have strong moat, working capital requirement grow at much slower rate than top line growth. As moat gets stronger, many of them do business on OPM (other people's money!). This "float" is a great booster as every rupee earned generates infinite return! Have a look at the data below. 6 out of 9 companies have negative working capital. In last, four years, 6 out of 9 companies have reduced working capital (even if it was already negative to start with). Take example of GSK Consumer healthcare. It reduced working capital from 52 crore on sales of 1700 crores to -355 crores on sales of 3400 crores!
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