How to use the Latest Quarter Stars scanner?
This scanner gives you lists of large-cap Indian stocks based on their strong quarter-on-quarter growth at reasonable prices. Value stocks need growth to do well, and growth stocks need good valuation to do well.
Hence, in this scanner, we have used earning growths to analyze the QoQ growth factor of a company and P/E & PEG ratios to analyze the valuation of a company. Let’s look at each of the scanner’s filters in detail:
Earnings Growth
Here, we use profits after tax (PAT) and sales growth metrics to track a company’s earnings growth.
- Profit after tax (PAT) refers to the amount remaining after a company has paid all of its operating and non-operating expenses, liabilities, and taxes. This profit is either distributed to shareholders as dividends or retained as earnings in reserves.
- Sales growth is the increase in sales of a product or service over time, indicating how well a business performs in terms of revenue from sales. It can be measured by comparing year-over-year, quarter-over-quarter, or month-over-month sales.
So, to analyze QoQ growth, we look for year-over-year (YoY) quarterly sales and profit growth to be greater than 15% and 20%, respectively.
Price-to-earnings (P/E) ratio
It is a metric that evaluates a company’s current stock price in relation to its earnings per share (EPS) and indicates whether it is overpriced or undervalued. In this filter, we use a P/E ratio of less than 30 times their earnings per share to find stocks at reasonable prices.
Price/Earnings-to-Growth (PEG) ratio
The price/earnings-to-growth ratio (PEG ratio) is a stock’s price-to-earnings (P/E) ratio divided by the growth rate of its earnings over a specified time period. The PEG ratio helps determine a stock’s value by considering the company’s expected earnings growth, offering a more comprehensive assessment than the standard P/E ratio. The PEG ratio helps in bringing companies together from different industries or sectors on a uniform measurement scale.
So, along with looking for growth companies, we need to ensure that they are trading at reasonable prices after factoring in their growth rate. We use a PEG ratio of less than 2 times to filter out stocks showing strong growth and trading at reasonable prices.
Market Capitalization
We use a market capitalization filter of more than 50,000 crores to stick to large-cap stocks. If you want to apply this filter on mid-cap and small-cap stocks, you can use a market capitalization of more than INR 5,000 crores.
By using the above filters for the scanner, we have obtained a list of strong quarterly growth companies that are available at reasonable valuations.
Don’t forget
- This is a first-level filter aimed to give you a good starting point in your search for strong quarterly growth companies that are available at reasonable valuations. You can further analyze these stocks to ascertain if they are good businesses and command a seat in your investing portfolio.
- This scanner uses YoY quarterly growth to measure performance, which is suitable for seasonal businesses as well. You can consider looking at QoQ performance as well.
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Frequently Asked Questions
Does this scanner get updated every quarter?
Yes, this scanner lists stocks based on the latest quarterly data published by companies, and updates automatically. You can check this scanner 15-20 days after the quarter ends, once companies begin releasing their results.
Can I invest in all the companies that are listed in this scanner?
No! This scanner is just to be used for idea generation. As mentioned in the ‘Don’t Forget’ section, this is just a first-level filter aimed to give you a starting point in your search for fundamentally strong companies that have started turning around. You can learn more about long term investing in Mr. Arvind Kothari’s How to Pick Stocks for Long Term course on Upsurge.club.