Source: https://www.youtube.com/watch?v=eFN8NY10IzM&t=576s
Deck: https://docs.google.com/presentation/d/11XgjVRobD-QxZV9xDAPwvMBAN76W23zOI0NrecgQX0o/edit#slide=id.p
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BPV Framework; Business, People, and Valuation
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Business: How good is the business itself?
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People: How good is the management and do they have minority shareholder friendly mindset?
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Valuation: Where does the valuation fall in the risk return profile?
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As soon as you land on a company page, go to the P&L section
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The data is for previous 10-12 years and it is important to look through 10-12 years to see how a company has managed to ride through the business cycles
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In the P&L look at the top line growth over time and is it steadily growing across time frames
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Next, look at the OPM over time, is it increasing or decreasing? Is it single digits or double digits?
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Look at the RoCE trend over time; generally 15% consistent RoCE over time is a good signal
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Similarly, look at the RoE trend
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Initially looking at these parameters should give a good sense of whether or not to dig deeper into the company
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While looking at the P&L, look for changes in years for sales growth, OPM, RoE, RoCE and then try to understand why the changes happened
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Then look at the balance sheet to understand how is growth funded i.e. through equity dilution, debt, or internal accruals
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Look at how the company is allocating its profits i.e. paying dividends, investing in assets
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While analyzing the allocation, look at how much of the profit of past 4-5 years goes to dividends, next how much has gone to the reserves, and how much has gone to fixed assets
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To judge management look at how much growth is through debt and how are they controlling the working capital cycle i.e. do they have a tight handle on the trade receivables and inventories
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Ideally smaller the company, higher the promoter holding
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For valuation, you can look at the peer comparison table, PE ratio trends over time
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The SCREENS tab is useful for stock idea generation