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RupeeCase notes . Topic

Company numbers

Reading ROE, cash flow, leverage, goodwill, buybacks and splits past the headline, with the lines a press release leaves out.

  • 24notes in this topic
  • 6to read in order
  • 3questions answered

01Read in this order

Six notes that carry the idea.

  1. 01Three ways to make eighteen percent10 min .
  2. 02Profitable and broke10 min .
  3. 03EPS grew, cash did not5 min .
  4. 04Five lines below the headline5 min .
  5. 05Off balance sheet debt: the notes are the balance sheet5 min .
  6. 06Interest coverage: the number under the profit6 min .

02Every note

24 notes, newest first.

  1. Three ways to make eighteen percentA brand, a retailer and a lender all show 18 percent ROE from 18x1x1, 3x3x2 and 20x0.09x10, and their returns on assets are 18, 9 and 1.8 percent. . 10 min
  2. Profitable and brokeStretching receivable days from 45 to 95 on 40 percent growth turns a 140 profit into minus 101 of operating cash, and the banker read the third statement first. . 10 min
  3. The stock split that changed nothingA 1:1 split turned 1,000 shares at Rs 200 into 2,000 at Rs 100, left the P/E and the ownership fraction untouched, and the volume bump faded within 90 days. . 8 min
  4. The buyback illusionRetiring 15 percent of shares lifts EPS almost 18 percent on flat profit, and since October 2024 buyback proceeds are taxed as a deemed dividend at slab. . 9 min
  5. One company, two sets of booksA parent's standalone profit of Rs 45 crore, consolidated Rs 140 crore and attributable Rs 100 crore give P/Es of 33, 11 and 15 on the same market value. . 5 min
  6. Bonus shares: the same pizza, more slicesA 1:1 bonus doubled the share count and halved the price, left Rs 80,000 worth Rs 80,000, and started a fresh holding period clock on the new shares. . 6 min
  7. Goodwill: the asset that exists because they overpaidA Rs 400 crore goodwill write down can turn a 500 crore profit year into 100 without a rupee of cash moving, as Tata Steel's Corus impairment showed. . 5 min
  8. Interest coverage: the number under the profitTwo companies with the same operating profit cover their interest 5 times and 1.5 times, and a 40 percent bad year leaves one at 3x and the other below 1. . 6 min
  9. Same P/E is not the same priceTwo stocks at a P/E of 20 growing 24 and 8 percent a year carry PEGs of 0.83 and 2.50, and after five years of growth one is twice as expensive as the other. . 5 min
  10. EBITDA is not profitA 28 percent EBITDA margin became a 3 percent net margin after depreciation, interest and tax, and eight times EBITDA worked out to about 41 times earnings. . 6 min
  11. Other income: you are buying the factory, not the FDReported profit rose from 170 to 200 while core business profit fell from 120 to 110, because other income's share of pre tax profit climbed from 29 to 45 percent. . 5 min
  12. Goodwill impairment: the day the future said noPaying Rs 1,000 crore for Rs 400 crore of real assets parks Rs 600 crore of optimism as an asset, and the write down only catches the books up to cash that left years earlier. . 5 min
  13. The business that grows on its suppliers' moneyA 135 day cash conversion cycle needs Rs 37 crore to fund Rs 100 crore of extra sales, while a minus 35 day cycle is handed about Rs 10 crore for the same growth. . 5 min
  14. Promoter pledging: the page nobody readsA stock down 40 percent in two sessions on no news is usually a pledge unwinding, as a 30 percent fall takes lender cover from 2.0x to 1.4x and triggers forced selling. . 6 min
  15. Why EPS growth lags net profit growthNet profit up 40 percent and share count up 25 percent is EPS up 12 percent, so read the per share line, track the count and use diluted EPS. . 5 min
  16. Five lines below the headlineA land sale, a deferred tax write back and a stretched depreciation life turned 3.8 percent profit growth into a 25 percent headline, and receivable days cracked first. . 5 min
  17. EPS grew, cash did notEarnings per share rising from 10 to 17 while free cash flow sits at 9 drops the conversion ratio from 0.90 to 0.53, and three quarters of that is a trend, not timing. . 5 min
  18. Off balance sheet debt: the notes are the balance sheetReported net debt of 1.2 times EBITDA becomes 2.7 times once lease liabilities and supply chain financing are counted, before the contingent liabilities in the notes. . 5 min
  19. Operating leverage: the amplifier nobody prices inTwo firms with Rs 200 crore of operating profit on Rs 1,000 crore of sales fall 40 and 20 percent on the same 10 percent revenue drop, depending only on where the costs sit. . 5 min
  20. ROCE below WACC is capital destroyed politelySales up 9 percent and ROCE up 4 points still destroy value when ROCE sits at 9 and the cost of capital at 12, because EPS rises the day you borrow and EVA does not. . 5 min
  21. DuPont: same ROE, three different businessesThree Nifty 200 stocks at 20 percent ROE got there by margin, by turnover and by a 4x equity multiplier, and only one of those levers survives a bad year cleanly. . 7 min
  22. Same net profit, two different quartersTwo companies printing Rs 245 crore of net profit collected Rs 220 crore and Rs 38 crore of operating cash, and the accruals gap is the line that does not negotiate. . 5 min
  23. A record low rupee redistributes, it does not subtractWith USD INR at 95.85, exporters earning in dollars gained on the revenue line while importers lost on the cost line and the neutral core did not move. . 6 min
  24. Brent: absorbers, amplifiers and the OMC counter tradeA crude move hits upstream energy on the revenue line, aviation and paints on the cost line, and oil marketing companies the opposite way to ONGC despite the same sector tag. . 6 min

03Go deeper

From the notes to the course, and to the cards.

Learn path 6The free Learn course on the same ground, with a certificate at the end. 18 index algosEvery RupeeCase strategy, model back tested, in your own demat. All eight topicsBack to the hub: reading paths, search and the latest notes.

04Questions, answered with figures

Three questions readers ask about company numbers.

Is a high ROE a sign of quality?

Not on its own. ROE is net margin times asset turnover times the equity multiplier. A brand, a retailer and a lender all print 18 percent from 18x1x1, 3x3x2 and 20x0.09x10, with returns on assets of 18, 9 and 1.8 percent. Read the note: Three ways to make eighteen percent

Why can a profitable company run out of cash?

Because profit is booked when a sale counts and cash arrives when the customer pays. Stretching receivable days from 45 to 95 on 40 percent growth turns a profit of 140 into minus 101 of operating cash. Read the note: Profitable and broke

Does a stock split or bonus issue make me richer?

No. A 1:1 split turns 1,000 shares at Rs 200 into 2,000 at Rs 100; the P/E, the ownership fraction and the total value are unchanged, and bonus shares start a fresh holding period clock for tax. Read the note: The stock split that changed nothing

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