There are a few pre-screens that I have, here are a few things I look for
- EPS should be More than 20
- Top-line growth should be more than 25% for the last 3 years
- Promotor should have skin in the game (good percentage of holding and this should be the only holding they have)
- PE ratio: High PE is okay as long as PE < 2-time profit growth
- The company should have a market cap between 300Cr to 30000 Cr
- There are other indicators like asset turnover, OPM, and PB ratio which vary from industry to industry
Once I have a basic prescreen then do a business model evaluation. I typically like stocks from the consumer, banking and IT sectors which are more secular.
LT Foods has grown at around 30% for the last 3 years which is good considering the nature of the business. Even if they grow at 25% stock should do well considering it is trading at a low PE. If there is PE expansion it will be icing on the cake.
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