Debt Reduction & Growth

This scanner identifies companies actively reducing debt while prioritizing growth, expansion, and returns. It highlights businesses committed to strengthening financial health through strategic debt management, targetting firms poised for sustainable growth and enhanced profitability.

Let’s learn about the filters used in this scanner.

Debt Reduction

It refers to a decrease in the amount of debt a company owes over time. In the scanner, we have used metrics where current debt is less than debt three years ago. This helps the investors gauge a company’s improved financial health. Redcuing debt indicates prudent debt management, potentially reducing financial risk and freeing up capital for growth initiatives, which can lead to increased shareholder value and stability.

Return on Capital Employed (ROCE)

This is a financial ratio used to assess a company’s profitability and capital efficiency. ROCE indicates how effectively a company generates profits from its capital. A higher ROCE suggests better utilization of capital in generating profits. This metric helps investors identify financially sound companies with strong profitability potential, offering assurance of effective capital utilization and future growth prospects.

Return on equity (ROE)

This metric measures a company’s profitability relative to shareholders’ equity. It shows how efficiently a company generates profit from its equity investment. ROE indicates management’s ability to generate returns on their investment. High ROE suggests effective use of shareholder funds, potentially signaling a financially healthy and efficient company. In this scanner, we filtered out companies whose average ROE over 3 years is greater than 12%, as it identifies firms that consistently generate high returns on their invested capital through efficient capital allocation and operational effectiveness.

Share of Promoters’ Holdings

This refers to the percentage of shares held by the company’s founders or significant stakeholders. High promoter holdings suggest a promoter’s confidence in the company’s potential and alignment of interests with management. It can indicate stability and a long-term commitment, offering assurance about the company’s performance and prospects. In this scanner, we filtered the stocks with promoters holding more than 40% to filter out companies where promoters have confidence, and long-term commitment of the founders or significant stakeholders in the company exists.

Capital Work in Progress (CWIP)

This represents costs incurred for assets under construction that are not yet ready for use. CWIP indicates ongoing investments in future growth and potential value generation, signaling a company’s expansion and long-term growth plans. This metric is crucial for assessing a company’s future earning capacity and capital allocation efficiency. In this scanner, we have used the metric that the current year’s CWIP is greater than the preceding year’s CWIP, which indicates increased investment in infrastructure or expansion projects YoY. This leads to potential future revenue growth and improved operational capabilities, making it a positive signal for investors anticipating long-term growth and company expansion.

The 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 overvalued or undervalued. Companies whose P/E ratio is less than their historical P/E of three years can be considered undervalued relative to their historical earnings performance. This can signal a potential buying opportunity for investors seeking stocks with promising growth prospects and favorable valuations.

Market Capitalization

It is the total value of a company’s outstanding shares, calculated by multiplying its share price by the number of shares. In this scanner, we identified companies with a market capitalization exceeding 5000 crores.

By using the above filters for the scanner, we have obtained a list of companies that are reducing their debt and focusing on growth and expansion.