Beyond Ratios - Du Pont Way of Studying Interrelationships

[oxusmorouz]

Quite often, people have the tendency of getting struck with a few famous ratios like PE, ROE and EPS and treating their growth rate as some fuzzy numbers rather than trying to identify interrelationships and their causes. I open this thread to try understand and learn the same.
I request those interested in exploring fundamental analysis to participate. I've made an attempt in studying cause-effect relationships and attached the same.

 

[scorpio155]

Good stuff, can we begin this analysis with some company

 

[oxusmorouz]

Good stuff, can we begin this analysis with some company

Sure. Post the details of the company you want and let's start off with it.

 

[scorpio155]

Lets pick Radha Madhav (BSE code - 532692 Radha Madhav Corporation Ltd ) I am trying to get an excel sheet made for all the data for the last few quarters.

 

[sujittalukder]

Perhaps this link will be useful to you:
http://www.traderji.com/fundamental-analysis/14707-doenload-financial-data-into-excel.html

 

[scorpio155]

Hey thanks Sujit - that was of real good help. Will get the data and work on it

 

[kkseal]

Wonderful Oxy. (Nothing new but very helpful Mind Map)

I used to be pained by the fact that someone of your edu background considers fundamentals trash (to me it's the driver of all things - technicals are just a timing tool) So am delighted you're finally posting in the fundas section.

BTW, could you provide a similar Mind Map on the factors affecting Cash Flows of a company?

Thanks & Regards,
Kalyan.

 

[oxusmorouz]

could you provide a similar Mind Map on the factors affecting Cash Flows of a company?

By cash flows, do you mean the cash flows which accrue to the investors (used in the traditional dividend discounting model) or free cash flows of the company explained by "Earnings - (Capital Expenditure - Depreciation)(1- debt ratio) - (Change in working capital)(1 - debt ratio)" which is used in free cash flow to equity model? The second is workable and the first is not.
I shan't be active for a couple of weeks due to exams. We'l get to work after that.

 

[kkseal]

By cash flows, do you mean the cash flows which accrue to the investors (used in the traditional dividend discounting model) or free cash flows of the company explained by "Earnings - (Capital Expenditure - Depreciation)(1- debt ratio) - (Change in working capital)(1 - debt ratio)" which is used in free cash flow to equity model? The second is workable and the first is not.
I shan't be active for a couple of weeks due to exams. We'l get to work after that.

The second one Oxy - Cash Flows pertaining to a company & its operations. I'd also like you to dwell upon Net cash flow & the Price/Cash Flow ratio.

I want to capture everything through ratios in FA (which allows at-a-glance appraisals & comparisons and also want to be able to calculate them quickly) just as i want to capture everything through indicators in TA. So please suggest what ratio/s capture the CF situation best and the factors (working capital changes being the biggest one i think - but how best to calculate it quickly) that affect them.

Once we have a grasp of the fundas, IFCI or some of the fertilizer stocks (the latter would be more predictive) could be good case studies.

I firmly believe everything moves for a reason and if we are able to grasp those reasons early enough and reduce them to tangible, cogent, comprehensive and comparable form it's possible to predict, see it coming, with at least a reasonable accuracy rate. Also the ability to see the whole by interrelating the parts is something that needs to be developed. And the ability to distinguish between what's sustainable & what's not and fix the duration accordingly.

Anyway, for now ATB for your exams.

Regards,
Kalyan.

 

[anjandatta]

i need more clarification at it