This story checks a lot of boxes: Excellent compounded sales as well as profit growth, and ROE; Decent ROCE %; Momentum in the stock price. However, my excitement fizzled out by the following observations:
- Earnings are growing, but the balance sheet is weakening with time. Incase business hits a rough patch, the balance sheet does not have liquid assets to fulfill its obligations from the liabilities.
- 12% of the Long Term Liabilities are funded by Short Term Assets.
Details as below:
| FY23 | Total Assets | Total Liabilities |
|---|---|---|
| Long Term | 256 | 291 |
| Short Term | 362 | 326 |
Disc: No Investment.
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