Hi, I am new to analysing stocks if I made any simple mistakes sorry in advance.
| Net Profit | CFFO | ||
|---|---|---|---|
| March-22 | 51 | 25 | |
| March-21 | 41 | 12 | |
| March-20 | 27 | 9 | |
| March-19 | 22 | 21 | |
| March-18 | 16 | 14 | |
| March-17 | 6 | 22 | |
| March-16 | 5 | 17 | |
| March-15 | 3 | 8 | |
| March-14 | 3 | 3 | |
| Total | 175 | 132 | 76% |
I have noticed that in the past 3 years, less than 50% of net profits are converted to cash. So even though the company has had an attractive average NPM of 15% in the past 3 years but should we give importance to the NPM metric? Since less than half of profits are converted to cash we may even consider NPM to be 7%.
And also FCF to Sales is also less than 1% on average in the past 5 years should I give importance to this metric? Why I am pointing this out is since this is a capital-light business I am expecting Capex to be less but capex justifies the sales growth then it leads to same problem of profits not converted to cash.
Disclosure: Currently not invested in the stock.
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