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Zephyr Protocol $ZEPH 70% Retracement & Fib LevelsZephyr Protocol (Proof of work) Hash Rate is now consistently higher the OMXSTO:XMR Monero. XMR has a 2.7 Billion market cap which $Zeph market cap is under 50 million. Zephyr Protocol is more useful than Monero since it has a DJED based overcollateralized $ZSD stablecoin system. Price has retraced 70% from the top and is consolidating with a nice volume profile support at this fib level. A price target similar to Monero would make $zeph worth around $1400 vs current price of $17. Time frame for this move would be this coming crypto bull run over 2024-2026.
Long
by Cephii
2
Apollo Hospitals - Management Quality and Economic MoatNSE:APOLLOHOSP Apollo Hospitals Enterprise Ltd, a prominent healthcare service provider in India, has shown significant management quality and a strong economic moat. Management Quality: Strategic Growth and Diversification: Apollo Hospitals has focused on expanding its services, including elective surgeries and diagnostics. This diversification and expansion into various healthcare segments highlight effective strategic planning. Financial Performance: The company has demonstrated robust financial growth over the years. Notably, there has been a substantial increase in net sales, EBITDA, and PAT (Profit After Tax), indicating a healthy financial status. This growth trajectory reflects strong operational capabilities and a successful business model. Operational Efficiency: The efficient operation of Apollo Hospitals is evident from the significant YoY growth in its Hospital segment and the Pharmacy business. The company has also entered into a 10-year commercial agreement with Amazon India, which is a strategic move to enhance its reach and operational efficiency. Economic Moat: Market Position and Brand Recognition: Apollo Hospitals is well-recognized in the healthcare industry, which contributes to its competitive advantage and customer loyalty. Integrated Business Model: The company's integrated business model, covering a wide range of services from primary to tertiary health requirements, strengthens its position in the healthcare sector. Operational Network: Apollo Hospitals' extensive operational network fuels its business growth, enabling it to serve a broad customer base effectively. Strengths and Weaknesses: Strengths: Strong operational performance and network. Growth initiatives that indicate potential for future expansion and development. Weaknesses: A noted decrease in working capital, which could impact business growth. Challenges such as the dearth of healthcare professionals and stringent industry regulations. In summary, Apollo Hospitals Enterprise Ltd exhibits strong management quality, marked by effective strategic planning, robust financial performance, and efficient operations. The company's economic moat is underpinned by its market position, integrated business model, and extensive operational network. While there are strengths in its operational performance and growth initiatives, the company must address issues related to working capital and navigate the challenges posed by regulatory environments and workforce management
NSE:APOLLOHOSPLong
by amitlall_79
$CRWD Weekly Chart Fundamentals + AlgorithmsFundamentals + Algorithms When you see a green up arrow, it signals an algorithmic buy alert and a new uptrend, allowing you to accumulate the stock for long-term growth Cloud-delivered security leader: CrowdStrike offers the Falcon® platform, a cloud-based solution protecting endpoints, cloud workloads, identities, and data. Market leader with industry recognition: Ranked #1 globally by IDC for modern endpoint security, Gartner for managed detection and response, and Frost & Sullivan for AI-powered indicators of attack. Strong customer base and expansion: 18,000+ subscription customers, including large enterprises and government agencies. Expanding product portfolio through acquisitions and organic development. Focus on profitability: Though not yet consistently profitable, CrowdStrike demonstrated significant progress with record operating and free cash flow in FY23, and a path towards profitability.
NASDAQ:CRWD
by AlgoTradeAlert
NAS100 Bullish Scenario: The Only Long I See (Daily/1 Hour)Fundamentally, 2023 was a strong year for stocks notably tech, which has created a strong bullish anticipation for 2024. We are in the midst of a CPI release coming this Thursday on the 11th. It is obviously the most important data release of the year (since we're 9 days in lol). More seriously it is the factor that WILL determine the move to come (no shit). By default I am bullish for speculative and technical reasons so I propose a rational entry for a long position assuming the show will go on. Here is the technical reasoning: 1. Price wicked perfectly on the DAILY 'bullish' 0.618 fib level during the Friday 5th session. This serves as our first bullish signal. 2. Throughout the session an intermediary range was created with a high that will serve as our BOS ('break of structure') line. 3. Throughout that same session and the following session (Monday 6th) price bounced twice, precisely, on its fib 'reload zone' which is the area that ranges between 0.618 and 0.782 (0.702 is extremely effective). These zones tend to render good entries if it's line with the general outlook (fundamentals + daily/weekly trend + general analysis). This serves as our second bullish signal. 4. With our BOS (third bullish signal), an FVG ('fair value gap') was formed. I couldn't explain why it works but with back testing and live testing, it changed the game for me. This FVG serves as another entry point. Why this FVG and not the ones above? We want the one with the highest probability of success so we pair it with the 'reload zone'! 5. By tracing a trend-based fib, which honestly I just learnt how to use today, you'll notice how price reacted perfectly to the 1.702 fib. This is just a way to increase the legitimacy of my analysis and to seem like I know things. But it is a high that we'll use for our potential profit taking (spoiler!). 6. The trade: we have a confluence of factors which giveth the highest success probability (in my opinion) for an entry point (EP) IF we are backed by a strong data release. So EP:16430, MAX SL:16240 / MIN SL: 16330 (based on the low of the FVG) and TP1: 16675 (the high/fib 1.702) / TP2: 17000 (a nice round number which is a good target since it represents a strong psychological bias for all traders). This gives a good RR 1:3 so in the midst of the CPI release which could basically f*** everything up, I wouldn't risk more than 1%. For trade management put the SL in BE when price has taken TP1. Note: if the CPI is very bullish, just leave approx. 20% of the position to flow to new highs (TP3). NFA and happy trading! :)
FX:NAS100Long
by Fondera
Cross-Checking News Trading with Technicals on CARR-USDDear Esteemed Investors, Everyone asked me to write an analytics on CARR. Although my forecasts achieved some success with this stock, let me remind you it's only a very small percentage of my portfolio. I can measure my exposure in hundreds of thousands, which is relatively small compared to my gold exposure, which I measure in millions. With that, I care about every one of my investments, and I hear your expectation to read analytics about this stock. Here you go. Chart and Technical Indicators CARR hit the target level of the last bullish forecast ($59.21 resistance), and technical indicators like MACD and RSI turned bearish. Under the chart, MACD shows bearish progress. Both MACD and RSI have a bearish cross on them. These are typical confirmations of resistance, and CARR hasn't defeated it yet. However, RSI still moves on the more bullish side of its chart, and MACD shows only a slight bearishness. It's not too late for CARR investors to continue the rally. Signs of continuation would be if RSI made a bullish cross again and MACD turned bullish. If they can break the mentioned resistance, a target of $61.12 is possible. With that said, the risk-reward ratio of a long isn't excellent here. So, I've taken profit of my long position from the last forecast. I estimate to open a new long if the price confirms support again around the $51.74 level. Breaking this support would suggest a downward trend rather than a healthy retracement. Downwards, the price can fall to lower trendlines below $48. If I open a new long, I'll use a tight stop loss setting. News Trading: AI Natural Language Processing Carrier Global has consistently delivered strong revenue growth in recent quarters, driven by higher demand for HVAC and refrigeration products. The company's recent acquisitions of Viessmann Climate Solutions and Honeywell's Global Access Solutions business expand its market reach and product portfolio. Carrier Global has a healthy balance sheet with a solid financial position. The company has the flexibility to invest in growth initiatives. The global HVAC and refrigeration markets can steadily in the coming years, driven by population growth, urbanization, and rising environmental concerns. On the other hand, the ongoing supply chain disruptions have impacted Carrier Global's production and delivery of products, potentially affecting sales and profitability. Escalating inflation could put downward pressure on consumer spending on discretionary items such as HVAC and refrigeration products. The HVAC and refrigeration industry is highly competitive, with several players vying for market share. The ongoing geopolitical tensions and potential for global recession could dampen demand for Carrier Global's products. Despite the potential headwinds, Carrier Global remains a well-positioned company with a strong track record of growth. The company's focus on innovation, strategic acquisitions, and expanding market reach should support its long-term growth prospects. However, investors should carefully monitor the company's ability to manage supply chain disruptions, inflation, and competitive pressures. Disclaimer: The success of my historic forecasts don't guarantee your future results. It's not an investment advice. Do your esearch. I wrote the analytics for entertainment purposes. Kind regards, Ely
NYSE:CARRLong
by Elysian_Mind
4
Picasso - PICA - Bringing IBC to Solana PICA is both the token of Picasso on Kusama and the Composable Chain on Cosmos. The PICA token exists to unify Polkadot, Kusama, and the Cosmos ecosystems through IBC transfers. Both the Cosmos and Polkadot ecosystems are rather large, but not in comparison to the Solana or Etherium ecosystems. This is where the true genius of PICA lies. The Picasso chain will facilitate an IBC connection, first with Solana, and then Etherium. This means that the DeFi ecosystems of Solana and Etherium will become interoperable with Polkadot and Cosmos, making the Picasso chain the epicenter of an insane amount of liquidity. This is why I am incredibly interested in this project.
Long
by theGREEKFREEKisWEB3
4
ARM: Good Share, Bad DerivativeOverview Arm Holdings PLC ( NASDAQ:ARM ) recently had its IPO back in September 2023. Since then it has bounced around between $46-$78 and I think it's gearing for a rally. Unfortunately there is not much room for a confident technical analysis because of ARM's minimal chart history but I believe this company is definitely worth adding to the Watchlist. ARM supplies semiconductor technology and has made it a company mission to lower carbon emissions. From my understanding they are attempting to lower their technology's carbon footprint by maximizing the processing power of their chips per every one watt of energy. Imagine this as the equivalent of increasing a vehicle's total miles per gallon (MPG). I have come under the impression that their technology is delivered to a plethora of companies including NVIDIA and Google who, in turn, use it to develop A.I. projects. It is this aspect that makes me speculatively bullish on the company's outlook. Speculative Projections According to their official website ARM technology can be found in nearly every modern device and is used by "70% of the world's population." ARM's market cap currently rests around $69 billion USD which places it around 1B shares. Since its technology is fueling what is essentially an artificial intelligence bubble within the stock market, it is my personal opinion that a $500B market cap is reasonable if not conservative. This would place ARM's share price around $500 which is a 631% upside from the current share price of $68.34. If you read my other idea on NVIDIA, I've mentioned that outsourcing may become an issue for NASDAQ:NVDA and so I believe that ARM may be able to fill that vacuum should a semiconductor crisis ever occur. A catalyst like this would definitely have the potential for propelling the stock to new highs. Risk Management If picking a good company out of a lineup wasn't enough, now the potential gains to losses needs to be considered. For every dollar risked, I believe at least three dollars should be the reward. With ARM I believe those types of gains are possible however this is the one of those exceptions where I would consider holding shares instead of trading derivatives. I picked through several option contracts, specifically Calls, and noticed that Open Interest was severely lacking on most contracts except for a few expiring within 90 days. Typically 90 days would suffice however with the lack of trading patterns -- and a sense of direction -- I believe this makes derivative trading too risky for ARM. To top matters off, the contracts with high open interest (>1000) would potentially only deliver 1:1 at best case scenario. All that said, the lack of direction and amount of share value that would have to be gained within a short period of time leads me to believe that investing in ARM Calls would be reckless. The Calls worth owning and that have an expiration greater than 6 months out have a near non-existent Open Interest. While that could always change if ARM starts getting some attention from the market, this may lead to illiquidity and an inability to unload the contract. Fundamental Analysis Current ratio (current assets / current liabilities) = 4.33 * Any ratios under 1.00 are considered a financial risk. Retained earnings = $2.440B which was a slight decrease from $2.457B in March 2023. * Allows the company to invest in itself (repurchase shares, expand, etc) Net income 6 Months Ended September 30 = ($5M) loss * The majority of the loss appears to have come from escalated operating expenses within the second quarter. This is a drastic 101.5% decrease from September 30, 2022 which had a net income of $339M. I'm experiencing some difficulty interpreting the Q2 Earnings Call. I am a self-taught analyst and learn on-the-go so I will need to process this information more before coming to a confident conclusion on the fundamental analysis. However, it does seem that operating expenses increased significantly (approximately by 171.8%) in the second quarter alone. I will make sure to provide any updates to my findings as a comment on this idea.
NASDAQ:ARM
by Shepherd_Investor
3
The SOLID State Battery Revoloution is upon us - QuantumScapeTarget 1: $15.32 Major Resistance Level: $18.48 Target 2: $26.77 Target 3 / Resistance Level: $36.10 Long Term Target 1: $53.92 Long Term Target 2: $79.65 Major Resistance Level: $95.82 (Disclaimer - After today's massive jump on Volkswagen news, it's likely we will see at least a small pullback. But in the grand scheme of things if this technology is actually what we are hearing, this is just a drop in the grand bucket) Investing in the Future: QuantumScape Corporation and the Solid-State Battery Revolution In the fast-evolving landscape of electric vehicles (EVs) and renewable energy, QuantumScape Corporation (NYSE: QS) is emerging as a trailblazer with its groundbreaking solid-state battery technology. Recent developments have sent the company's stock soaring, underlining the potential transformative impact of QuantumScape's innovations on the future of energy storage. Milestone Achievement with Volkswagen Collaboration QuantumScape's recent surge is attributed to a significant milestone achieved in collaboration with Volkswagen. The company successfully tested its anodeless solid-state lithium-metal cells technology, confirming its capabilities through an A-sample test. PowerCo, an independent entity, validated the test results, revealing that QuantumScape's solid-state cell not only met but exceeded the requirements of the test. Impressively, the solid-state cell completed over 1,000 charging cycles, equivalent to a remarkable half a million kilometers of travel for an electric car with a WLTP range of 500-600 kilometers. Even more compelling is the fact that the cell demonstrated minimal aging, retaining an impressive 95% of its capacity or discharge energy at the end of the test. PowerCo CEO Frank Blome expressed his optimism, stating, "These are very encouraging results that impressively underpin the potential of the solid-state cell." The successful completion of this test positions QuantumScape as a frontrunner in developing a battery cell that could offer extended ranges, rapid charging capabilities, and minimal degradation over time. Technical Advancements Driving QuantumScape's Success QuantumScape's technology addresses critical challenges faced by traditional lithium-ion batteries, which are approaching the limits of their energy density. The company's innovations include an anodeless architecture and a proprietary solid ceramic separator, leading to notable improvements in energy density, charging speeds, and safety. Key advantages of QuantumScape's solid-state battery technology include: Energy Density: Significant increase in volumetric and gravimetric energy densities by eliminating graphite/silicon anode host material. Fast Charge: Enables less than 15-minute fast charging (10-80%) by eliminating the lithium diffusion bottleneck in the anode host material. Extended Life: Eliminates capacity loss at the anode interface, thereby extending the useful lifetime of the battery. Enhanced Safety: Replaces the organic separator with a solid-state separator that is nonflammable and noncombustible, significantly improving safety. Cost Efficiency: Lowers costs by eliminating the anode host material and associated manufacturing costs. Investment Considerations QuantumScape's recent success and technological advancements position the company as a key player in the future of energy storage. The collaboration with Volkswagen further strengthens its industry standing, and the positive test results underscore the viability of its solid-state battery technology. Investors should note that QuantumScape's stock has experienced a notable uptick, reaching its highest level since early August. However, with short interest at 15.6% of the total float, some volatility may be expected. As QuantumScape continues to perfect and scale its manufacturing processes, investors have the opportunity to align themselves with a company at the forefront of revolutionizing energy storage. The upcoming Q4 earnings report, expected in the middle of February, will be a key indicator of the company's financial health and growth trajectory. In conclusion, QuantumScape Corporation presents a compelling investment opportunity for those seeking to participate in the transformative shift toward more efficient, safer, and longer-lasting energy storage solutions. As the world increasingly embraces electric vehicles and sustainable energy practices, QuantumScape stands poised to play a pivotal role in shaping the future of the industry.
NYSE:QSLong
by Helios_Capital_Investment
India's Non-Stop Bullet Train - TEXRAIL - Choo Choo Train :)TEXRAIL turned out to be a Multi-bagger in 2023. The initial call was given at 64 for a target of 116, 136, 157. It blasted all 3 targets in less than 8 months resulting in a profit of more than 2.75x - Amazing Isn't it Recently the Indian Govt has announced major investment of more than 1 Lakh Crores into Railways & Infrastructure and among the Railway Themed Stocks - TEXRAIL plays a prominent Role. Our Multi-Timeframe Analysis shows following results 1. Monthly - Huge Cup & Handle BO done with targets of 240, 290 2. Daily - Even on the Shorter Term - It looks Super Bullish above 180 resistance levels. Another Smaller Cup & Handle BO done at Daily TF with target of 215 All we need is a strong close above 181-185 WCB for the Choo Choo Train to Blow its Horns and Chug along :) Disclaimer: Stocks-n-Trends is NOT a SEBI registered company. We do not provide Buy / Sell recommendations - rather we provide detailed analysis of how to review a chart, explain multi--timeframe views purely for Educational Purposes. We strongly suggest our followers to "Learn to Ride the Tide" and consult your Financial Advisors before taking any positions. If you like our detailed analysis, please do rate us with your Likes, Boost and share your comments -Team Stocks-n-Trends
NSE:TEXRAILLong
by Stocks-n-Trends
Bajaj Finance - Management Quality & Economic MoatNSE:BAJFINANCE Bajaj Finance Ltd, one of India's largest and most diversified Non-Banking Financial Companies (NBFCs), has exhibited robust management quality and developed a significant economic moat in the financial services sector. Management Quality: Strategic Growth: Bajaj Finance Ltd has shown a consistent focus on strategic growth and resilience, particularly evident during the COVID-19 pandemic. Despite the disruptions caused by the pandemic, the company maintained a nuanced strategy on acquisition and underwriting across its businesses. This adaptability reflects strong managerial foresight and capability. Financial Performance: In FY2022, Bajaj Finance recorded a 29% growth in assets under management (AUM) and a 59% growth in profit after tax on a consolidated basis. The company managed to achieve this impressive growth despite disruptions in business and elevated credit costs. Capital Adequacy and Risk Management: Bajaj Finance remains well-capitalized with a capital-to-risk weighted asset ratio (CRAR) of 27.22% as of March 31, 2022. This is among the best for large NBFCs in India. The company's robust risk management practices have resulted in a strong portfolio quality, with Gross NPA at 1.60% and Net NPA at 0.68%, among the lowest in the industry. Operational Efficiency: The company's operational efficiency is highlighted by its diverse customer base, digital transformation, and omnichannel strategy. This approach has enhanced customer experience and contributed to business growth. Economic Moat: Market Position and Sectoral Importance: As an NBFC, Bajaj Finance has become an integral part of India's financial sector. Its assets, worth more than ₹54 lakh crore as of March 31, 2021, constitute about 25% of the balance sheet size of the banking sector. Rapid Asset Growth: Over the last five years, NBFCs' assets have grown at a cumulative average growth rate of 17.9%, with Bajaj Finance being a key contributor. Customer Expansion: Bajaj Finance's customer franchise grew significantly, adding 2.21 million new customers in Q4FY22 alone. This growth in customer base is a testament to the company's strong market penetration and customer retention strategies. Diversification and Innovation: The company has diversified its product offerings and continued to innovate, leveraging its understanding of regional dynamics and customer preferences. This diversification has enabled it to tap into various market segments effectively. Strengths and Weaknesses: Strengths: High growth rates anticipated by analysts in the coming years. High profitability due to outperforming net margins. Frequent upward revisions of sales forecasts. Strong analyst recommendations and upwardly revised price targets. Weaknesses: High valuations in earnings multiples. High valuation levels compared to the size of its balance sheet. Limited generosity in shareholder compensation. Conclusion In summary, Bajaj Finance Ltd demonstrates strong management quality characterized by strategic growth initiatives, robust financial performance, and effective risk management. Its economic moat is underpinned by its significant market position, rapid asset growth, customer expansion, and product diversification. The company's strengths in maintaining high profitability and adapting to market changes are counterbalanced by concerns about its high valuation levels and shareholder compensation policies.
NSE:BAJFINANCELong
by amitlall_79
Bajaj Finserv Ltd. - Management Quality and Economic MoatNSE:BAJAJFINSV Bajaj Finserv Ltd, a leading Indian financial services company, has showcased notable management quality and developed a significant economic moat. The company operates through its controlling stakes in various businesses, including Bajaj Finance Ltd. (BFL), a large and profitable NBFC. Management Quality: Strategic Growth and Diversification: Bajaj Finserv has strategically diversified its business into lending, asset management, wealth management, and insurance. This diversification helps mitigate risks associated with market fluctuations in any single sector. Financial Performance: The company has demonstrated strong financial performance over the years. Its operating income grew significantly from ₹6,022 crore in FY2014 to ₹82,071 crore in FY2023. The adjusted EPS (Earnings Per Share) also showed a healthy growth trajectory, increasing from ₹9.7 in FY2014 to ₹46.5 in FY2023. Capital Adequacy and Asset Management: Bajaj Finserv maintains robust capital adequacy, ensuring a solid financial foundation and ability to invest in growth opportunities. Its subsidiary, BFL, has an AUM (Assets Under Management) increase of 29% to ₹197,452 crore in FY2022. Economic Moat: Market Position and Sectoral Importance: Bajaj Finserv, through its subsidiaries, has become a vital part of India's financial sector. BFL alone constitutes a significant portion of the NBFC sector's assets. Customer Base and Reach: With a franchise of 57.6 million customers and an expansive distribution network, the company has a deep penetration in the market. This wide reach is crucial for sustaining long-term growth and maintaining a competitive edge. Digital Transformation: The company’s focus on digital transformation and omnichannel strategies enhances customer experience and operational efficiency. This positions Bajaj Finserv favorably in an increasingly digital financial landscape. Strengths and Weaknesses: Strengths: Strong growth in business volume anticipated by analysts. High profitability with outstanding net margins. Frequent positive revisions of sales forecasts and strong analyst recommendations. Agile and innovative response to external events like demonetization, GST implementation, and the pandemic. Weaknesses: High valuations in earnings multiples and balance sheet size. Limited generosity in shareholder compensation. Conclusion In summary, Bajaj Finserv Ltd's management quality is characterized by its strategic diversification, robust financial performance, and effective capital management. Its economic moat is reinforced by its significant market position, vast customer base, and digital transformation initiatives. The company's strengths in maintaining high growth and profitability are counterbalanced by its high valuation levels and a conservative approach to shareholder compensation.
NSE:BAJAJFINSVLong
by amitlall_79
Why do growth companies have a high P/E?Namaste! You must have wondered why growth companies like the following have ridiculous P/E (price to earnings ratio)? Amazon (314.66 P/E) Netflix (47.04 P/E) Tesla (80.80 P/E) Nykaa (2,007.14 P/E) Zomato (not profitable/negative P/E) Paytm (not profitable/negative P/E) Etc. Let's find out. By general definition and understanding, a company is a “money-making machine”. But growth companies defy this rule by not making the money for years if not decades. Growth companies generally try to avoid the profits. Instead they reinvest the profit to increase sales (by more advertising expenses, more sales employees, more spending on research & development, etc). Fun fact: Mr Jeff Bezos (CEO and largest individual shareholder of Amazon) used this idea since the beginning of Amazon (before the year 2000). He didn't show the profit in the books of Amazon, but reinvested it to increase sales numbers as much as possible till this day. Why sales number instead of EPS (earnings per share)? A: You see the analysts, which include institutions, individual (retail investors), High Networth Individuals (HNI) have something to evaluate the value of any company. So, there are generally two factors for evaluating any company's value, 1: Its EPS or 2: Sales numbers (growth). They would look for either P/E (price to earnings) or P/S (price to sales ratio). The company which doesn't have a P/E (means negative EPS or say a loss), we can value any loss making company via P/S ratio. So let's take a hypothetical example of 2 different types of companies, 1 is a Value company (like Apple, Microsoft, Reliance Industries, HDFC Bank, etc) and 2 is a Growth company (like Amazon, Tesla, Netflix, Zomato, Paytm, etc). General Assumption: Let's assume both types of companies make (1) Sales of Rs 10000 crore in the 1st year, (2) a gross profit margin of 50% (means Rs 5000 crore “gross profit”) at the start, (3) a market cap of Rs 50000 crores with 100 crore number of shares outstanding, (4) an uniform tax rate of 30%, (5) a share price of Rs 500 at the start, (6) an owner with 51% stake and (7) both the companies are listed in the year 2020. Value company: Companies like Reliance, HDFC Bank, etc don't need to and only spend 30% of gross profits every year for expenses and growth. Meaning, its net profit before taxes is Rs 3500 crores. Net profit after taxes is Rs 2450 crores. So EPS would be Rs 24.50 per share and 20.40 P/E. Net profit or say EPS will be high for the value company because it will try to not incur unnecessary expenses (like more advertisement, increasing the number of sales employees and their salary, more discounts on the products, etc). Exception: The growth also greatly depends on the nature of business. For e.g. a software company will grow at a very fast pace because its product is a “software”, which is infinitely scalable. More software can be produced “with a single click”. Whereas, for an automobile company, it isn’t the case. Growth company: This company will spend 90% of its gross profit to increase sales. Meaning its net profit before taxes is Rs 500 crores. Net profit after taxes is Rs 350 crores. So EPS would be Rs 3.5 per share and 142.85 P/E. Assumption for growth (YoY) for both the companies: It’s most likely the growth company will have a higher growth percentage as compared to value companies because the growth company is taking actions, like spending money to increase sales, spending on research and development, mergers and acquisitions (by share swap deal), etc. Whereas, a value company is trying to avoid unnecessary spending and focus more on profitability i.e. net profit. So, let’s take 20% growth rate for a value company and 40% growth rate for a growth company. Lets calculate the sales, gross profit, taxes, net profits before taxes, market cap, price to earnings ratio and earnings per share (EPS) for 10 straight years, assuming the constant rates for sales growth at 20% for a value company and 40% for a growth company every year.. Value company financials chart: Column heading: 1. Year; 2. Sales (Rs Crore) with 20% growth YoY; 3. Gross profit (Rs Crore); 4. Net profit before taxes (after spending 30%); 5. Taxes (Rs Crore); 6. Net profit after taxes (Rs Crore); 7. Market Cap (Rs Crore); 8. P/E; 9. EPS. | 2020 | 10000.00 | 5000.00 | 3500.00 | 1050.00 | 2450.00 | 50000.00 | 20.41 | 24.50 | | 2021 | 12000.00 | 6000.00 | 4200.00 | 1260.00 | 2940.00 | 60000.00 | 20.41 | 29.40 | | 2022 | 14400.00 | 7200.00 | 5040.00 | 1512.00 | 3528.00 | 72000.00 | 20.41 | 35.28 | | 2023 | 17280.00 | 8640.00 | 6048.00 | 1814.40 | 4233.60 | 86400.00 | 20.41 | 42.34 | | 2024 | 20736.00 | 10368.00 | 7257.60 | 2177.28 | 5080.32 | 103680.00 | 20.41 | 50.80 | | 2025 | 24883.20 | 12441.60 | 8709.12 | 2612.74 | 6096.38 | 124416.00 | 20.41 | 60.96 | | 2026 | 29859.84 | 14929.92 | 10450.94 | 3135.28 | 7315.66 | 149299.20 | 20.41 | 73.16 | | 2027 | 35831.81 | 17915.90 | 12541.13 | 3762.34 | 8778.79 | 179159.04 | 20.41 | 87.79 | | 2028 | 42998.17 | 21499.08 | 15049.36 | 4514.81 | 10534.55 | 214990.85 | 20.41 | 105.35 | | 2029 | 51597.80 | 25798.90 | 18059.23 | 5417.77 | 12641.46 | 257989.02 | 20.41 | 126.41 | | 2030 | 61917.36 | 30958.68 | 21671.08 | 6501.32 | 15169.75 | 309586.82 | 20.41 | 151.70 | Growth company financials chart: Column heading: 1. Year; 2. Sales (Rs Crore) with 40% growth YoY; 3. Gross profit (Rs Crore); 4. Net profit before taxes (after spending 90%); 5. Taxes (Rs Crore); 6. Net profit after taxes (Rs Crore); 7. Market Cap (Rs Crore); 8. P/E; 9. EPS. | 2020 | 10000.00 | 5000.00 | 500.00 | 150.00 | 350.00 | 50000.00 | 142.86 | 3.50 | | 2021 | 14000.00 | 7000.00 | 700.00 | 210.00 | 490.00 | 70000.00 | 142.86 | 4.90 | | 2022 | 19600.00 | 9800.00 | 980.00 | 294.00 | 686.00 | 98000.00 | 142.86 | 6.86 | | 2023 | 27440.00 | 13720.00 | 1372.00 | 411.60 | 960.40 | 137200.00 | 142.86 | 9.60 | | 2024 | 38416.00 | 19208.00 | 1920.80 | 576.24 | 1344.56 | 192080.00 | 142.86 | 13.45 | | 2025 | 53782.40 | 26891.20 | 2689.12 | 806.74 | 1882.38 | 268912.00 | 142.86 | 18.82 | | 2026 | 75295.36 | 37647.68 | 3764.77 | 1129.43 | 2635.34 | 376476.80 | 142.86 | 26.35 | | 2027 | 105413.50| 52706.75 | 5270.68 | 1581.20 | 3689.47 | 527067.52 | 142.86 | 36.89 | | 2028 | 147578.91| 73789.45 | 7378.95 | 2213.68 | 5165.26 | 737894.53 | 142.86 | 51.65 | | 2029 | 206610.47| 103305.23| 10330.52 | 3099.16 | 7231.37 |1033052.34 | 142.86 | 72.31 | | 2030 | 289254.65| 144627.33| 14462.73 | 4338.82 | 10123.91 |1446273.27| 142.86| 101.24| Advantages and Disadvantages of a growth company: Advantages: 1. Growth companies have a higher growth percentage than value companies, due to its exclusive focus on spending and increasing market share. 2. Less net profit figure means less taxes paid to the government. So, it can be utilized to further improve the business by other means. 3. Growth companies make millionaires and billionaires faster (maybe in less than a decade), whereas value companies tend to take more than a decade. 4. Many growth companies are new age companies, whereas value companies are old age companies. Since the consumer’s taste keeps changing over time, growth companies have a greater opportunity to “invent the next big thing”. Disadvantages: 1. Since the growth company doesn’t focus on net profits, it doesn’t have profit money to run or grow the business. They are highly dependent on investor’s funding or debt for their growth. 2. The growth companies are highly vulnerable to interest rate hikes and many fail during rising interest rates. Because interest payment on debt will rise, investor funding will stop because they can get greater return on bank deposits which is much safer than investing in a growth company, demand in the economy cools down for unnecessary things (other than Roti, Kapda aur Makaan). 3. Loans against securities have a higher haircut for growth companies. Means, you will get less loan on pledge of Zomato’s stock as compared to pledge of Reliance’s stock. 4. The growth company either doesn't pay dividends, or pays very little. This is due to their very low net profits and their exclusive focus on growth. 5. The growth rate of a company declines over time when the company gets bigger and matures. 6. The general idea of a growth company is “one day, the company will convert its huge sales number into net profits”. For many growth companies, this doesn’t happen as expected. Because, once the “lucrative discounts” stop, the consumer moves to the next company for a discount. In other words, the sales numbers were misleading and failed to fulfill the promise of profits. Is a growth company better than a value company? A: High growth percentage doesn’t come for free. The success rate of growth companies is around 10-20%. Whereas, the value companies have a bigger success rate of surviving (more than 50%) historically. Investing in a growth company is like “taking a bigger risk to earn a bigger profit”. Conclusion: Value vs Growth company is a big debatable topic which divides investors into two groups, one is believer and one is doubter. It's a much more difficult topic than I explained because I used constant figures for growth. But in real life, growth is not constant due to various factors such as change in market dynamics, actual nature of business, country's economic stability, interest rates, etc. I just tried to explain my understanding of high P/E companies and why they even exist. Disclaimer: This article should not be considered as a financial advise.
NSE:NIFTY
by UnknownUnicorn7637383
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