Most investors open a result and drown in 40 line items. You only need six numbers to know whether a quarter was good, bad or just noisy.
The 6 numbers
- Revenue growth, year on year. Compare with the same quarter last year, not the previous quarter. Seasonal businesses (consumer, retail, agri) swing a lot from quarter to quarter.
- Operating (EBITDA) margin. Profit from core operations as a share of revenue. Rising margin with rising revenue is the healthiest combination. Falling margin on rising revenue means costs are growing faster than sales.
- Net profit (PAT) and what is inside it. Check for one-time items such as asset sales, tax write-backs or exceptional gains. If profit jumped but operating profit did not, the jump may not repeat.
- Earnings per share (EPS). Net profit divided by shares. Buybacks and fresh share issues change it, so read it with the share count.
- Debt and interest cover. Look at total borrowings and how many times operating profit covers interest. Falling debt with steady cover is a good sign.
- Cash flow from operations. Profit on paper is not cash. If profit keeps rising while operating cash flow stays weak for several quarters, ask why.
A quick checklist
- Compare against the same quarter last year.
- Compare against peers in the same sector.
- Read management commentary for guidance.
- Check promoter holding and pledge data in the shareholding pattern.
No single number decides anything. Results are one input among many.
Follow the markets in English and Hindi with our free web app: wolfnews.surge.sh
Disclaimer: This post is for educational purposes only. It is not investment advice or a recommendation to buy or sell any security. Wolf of Dalal Street is not a SEBI-registered investment adviser.
Recent Comments