Monday, December 10, 2007

Operating margins convey the efficiency of operation of the company and thereby influence its profitability

Due diligence, by the dozen

Before you invest in a company, there are at least a dozen factors to consider, says Mr Sandeep Shenoy, Strategist, PINC Research, Mumbai. “Whenever an investor forays into stock markets, he is faced with more questions than answers, and feels intimidated by the sheer scale and dynamics of data around him,” he adds.

To help arrive at a proper decision, he emphasises the need to take into account aspects about a company’s working, the financial and business environment. The 12 factors, according to Mr Shenoy, are as follows: Addressable markets, business model, promoter ability, operating margins, growth or scaling up, operating leverage, asset sweating, debt equity ratio, cash flows, dividend and taxes, value proposition, and cyclicality and dependency.

Excerpts from the interview.

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