Kalkine’s Earnings Hunter Report
Kalkine’s Earnings Hunter Report enlightens the general philosophy of safeguarding investors’ interests with insights on stocks typically having proven track record of earnings performance and strong potential. With rising inflation and volatile commodity and crude oil prices, investors generally look for fundamentally strong stocks that can wade off the market turmoil.
Given this backdrop, and to make the process robust, Kalkine has developed a unique scoring-based model to identify attractive opportunities around stocks. The stock selection methodology is built on the premise that stocks with sound earnings track record typically tend to sustain during the market downturn and may perform well during market uptrend. The key earnings metrics and our research methodology has been defined as below:
Source: Analysis by Kalkine Group
Metrics, as defined in general:
Dividend Yield: Consistent dividends reflect the commitment by company’s management in rewarding shareholders. It persuades investors’ confidence.
Cash flow Yield: Investors are attracted towards companies with strong cash flow generation. Stocks with high free cash flow generation are self-sufficient to fund capex, pay debt obligations, and reward shareholders via dividends and share buybacks.
Return on Equity (ROE): Higher ROE reflects the company’s ability to utilize capital to generate profits. Stocks with higher ROE provide a hedge against rising inflation. A prudent business model, control over fixed overheads, and degree of leverage are some of the contributing factors.
EBITDA Margin: Stocks with an integrated value-chain and sound investment in procurement and distribution command a higher operational efficiency. EBITDA is a cash flow proxy as stocks with consistent EBITDA generation are typically cash rich stocks.
Revenue Growth: The ability to increase scalability reflects the company’s commitment to enhance its market share. Prudent strategies in asset expansion, new manufacturing facilities, and product launch result in top-line growth which directly impacts the earnings of any company.
Asset Turnover Ratio: A quick cash conversion reflects a lean operating model and provides consistent cash flows. Stocks with higher asset turnover divulge investments in fixed assets and the ability to generate revenues from assets it deployed.
Net Debt/EBITDA Ratio: Higher earnings negate the degree of financial leverage. Stocks with a higher coverage ratio command a lower cost of capital and better credit ratings.
To summarize, Kalkine’s ‘Earnings Hunter’ Report aims to provide actionable insights on stocks in mid-cap to large-cap space based on the above key earning metrics. The report aims to analyse stocks based on earnings potential and provide an ‘Attractive’, ‘Unattractive’, or ‘Neutral’ stance on the stocks based on Earnings Hunter Score.
With rising crude prices and global inflation, the report might capture stocks with an ability to drive through the market meltdown.