Another STRONG candidate for long term investment has come to light. )It seems I have pretty much figured out what kind of companies I want
This Entity is managing its business wonderfully. The sector is not particularly spectacular, but the management is wise. I say that because, it is consistently increasing its fixed assets size, year after year. Hence, increasing sales revenue. Here comes the best part, all of this is happening without taking on any debt. Yes, it has zero debt! As a result it is able to maintain net profit above 10% and give dividends on a regular basis (which I wish they wouldn't).
Its Sales and production scheme Its inventory days is less than 50 and maintained. This is an important benchmark, else I'd assume sales and production teams are out of synch, which can be dangerous as it would cause them to have an ever increasing need for working capital.
Its debtor days are less than 10! Means it has a strong goodwill component.
And finally, it has always (yes, always) had positive free cash flow. Meaning, the management is wise enough to invest in expansion
This is the perfect kind of business. I will spend sometime trying to understand its product-line, if it is simple and a need of the common man then even better.
I give Swaraj Engines 4 out of 5 stars.
Now, coming to the important aspect of buying price.
It appears, buying near 350 would be a safe bet. However, it is a mid sized company and is likely to give a strong swings and one such down-swing is expected to reach as low as Rs.280.