Manish_Okhade, I suspect you will be quite pleased to know that eClerx will almost match the score of Hawkins if it were to be in TED XI. eClerx performs well in 9 out 10 parameters.

 

Joel Greenblat does same thing but only based on his magical formulae of 2 parameters. a) RoCE and b) Earnings Yield.

 

Oh yeah, he copied from me. He keeps giving missed call to my mobile all the time.

 

I was thinking if we could run this system as if we are in 2006-2007 and see how well the stocks that come up triumphs using the system have done in reality.I could do that once smartcat finishes his exercise.

 

Go ahead. Data is available on Moneycontrol & Rediff Money.

 

Smartcatji what is your opinion on using EV/EBIDTA as a replacement for PE ratio?

 

EV/EBIDTA is mostly used for loss making companies right? I keep hearing from EV/EBIDTA for companies like GMR from research reports. Anyway, EV/EBIDTA number for each stock is not easily available from financial websites.

 

Regarding market cap, please exercise caution especially for Hawkins which is operating in matured market and also market size it self can't be compared with other business.

 

The points weightage for Mcap IMO has to be revisisted , as an example at what Mcap would you say HAWKINS is high or low ..if the cookware industry size itself is 1000 crs and hawkins in 500 crs ..i wouldnt say its low mcap...on the other hand if cookware industry size is 10000 crs then hawkins has still a long way ahead. Same applies to almost all companies.

 

Let's say cookware industry is worth Rs. 1000 cr and Hawkins' MCap is Rs. 500 cr. Then obviously, Hawkins will not be able to grow its topline and bottomline much in the next financial year. And when we start ranking the stocks next year, it will show up with as a cascading effect on DPS growth. The company might then expand into other segments by taking on debt. This will again show up in debt/equity ratio, dividend payout ratio, RoE etc.

 

So eventually, since we are considering 10 different parameters and updating the stats every 3 months, the "marketsize/marketcap" issue will be automatically sorted out by the ranking system.

 

But it's difficult to "predict" scalability of business and I think smartcat doesn't want to go into prediction and hence MCAP is taken for simplicity.

 

Right. Scalability/marketsize cannot be determined for each stock listed in the stockexchange. Remember that we are not trying to analyze TED XI stocks - we are trying to rank any set of stocks in a shortlist or a portfolio.