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Dr. Vijay Malik has earned the respect and admiration of informed investors across the country and in this video, I shall examine one of his many articles which is titled ""Final Checklist for Buying Stocks". Understandably, this checklist is designed to help investors pick stocks more efficiently and it comprises four major categories encompassing financial metrics, business parameters, valuation indicators, and management analysis. We'll explore every metric within these categories and apply them to a screener with the goal of narrowing down a list of over 4,000 stocks to just 10 potential long-term investment opportunities.
👉 Final Checklist for Buying Stocks (article by Dr. Vijay Malik): www.drvijaymalik.com/stocks-b...
👉 You can access the screener here: www.screener.in/screens/11646...
Category 1 : Financial Metrics
a) Sales Growth: Dr. Malik prefers consistent sales growth of at least 15% over 7 to 10 years
b) Profitability: A net profit margin of at least 8% is a requirement
c) Tax Payout: The tax rate should be close to the corporate tax rate, around 25%
d) Interest Coverage: It should be at least 3, indicating the company's ability to service its debt
e) Debt-to-Equity Ratio: Less than 0.5 is considered ideal
f) Current Ratio: It should be at least 1.25, demonstrating the ability to cover short-term liabilities
g) Positive Cash Flow: The company should consistently generate positive cash flow from operations
h) Profit-Cash Flow Alignment: There should be no more than a 20% deviation between operational cash flows and net profits
Category 2 : Business Parameters
a) Sales Growth Relative to Peers: Dr. Malik looks for companies with sales growth higher than their competitors
b) Production Capacity and Sales Volume: The company should demonstrate an increase in production capacity and sales volume
c) Conversion of Sales Growth into Profit Growth: Sales and profit growth should be in alignment.
d) Conversion of Profits into Cash: Profits and cash flows from operations should be close
e) Creation of Shareholder Value: The company's market cap growth should surpass the increase in retained earnings over the last 10 years
Category 3 : Management Analysis
a) Background Check: Examine the backgrounds of the company's promoters and directors
b) Management Succession Plan: Assess the fairness and capability of the succession plan
c) Promoter's Salary: Ensure the promoter's salary doesn't rise disproportionately to profits
d) Project Execution Skills: Evaluate the company's track record in project execution
e) Dividend Increase: Dividends should have consistently increased over time
f) Promoter Shareholding: High promoter shareholding is favorable, ideally at least 51%
g) Insider Buying: Check if promoters are buying more shares
h) Foreign Institutional Shareholding (FII): Lower FII shareholding is preferred, typically less than 20%
Category 4 : Valuation Indicators
a) PE Ratio: Historical and industry PE comparisons
b) PEG Ratio: Below 1 indicates undervaluation
c) Earnings Yield: Higher than the 10-year government bond yield (currently 7.17%)
d) PB Ratio: Ideally less than 1 (none in our shortlist)
e) Price-to-Sales Ratio: Below 1.5 for buying, above 3 for selling
f) Dividend Yield: Desirable at 5%, but not critical for fast-growing companies
👉 Download the Fisdom app:
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👉 Video Chapters:
00:00 Dr. Vijay Malik and the Art of Peaceful Investing
01:22 Financial Analysis
05:27 Business and Operational Analysis
08:21 Management Analysis
09:22 Valuation Analysis
11:17 Shankar's Viewpoint
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#stockpicking #longterminvesting #fundamentalanalysis #valuation #screener
Disclaimer: I am not a SEBI registered investment advisor or research analyst. I am not registered with PFRDA or IRDA either. The content posted on this platform is purely for educational purposes and none of it constitutes investing or trading advice. Viewers should do their own research and diligence before investing or acting on the information presented. Some of the links I have posted in the video, the description, the comments and other related resources might be affiliate links