How to use the Capacity Expansion scanner?
This scanner gives you a list of Indian stocks planning substantial capital expenditures, leading to higher chances of growth in the future. We have used factors like gross block, cash used in/from investing activities, and capital work in progress (CWIP) metrics to look for such companies.
Let’s look at these in detail:
Gross Block
This refers to the total historical cost of a company’s fixed assets before accounting for depreciation. Gross Block indicates the scale of a company’s capital investments in physical assets like property, plant, and equipment, helping assess the company’s operational capacity and long-term investment in infrastructure.
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 combination of CWIP and Gross block and some calculations to assess the efficiency of capital deployment, the potential for future revenue generation, and overall asset utilization efficiency.
Cash Used In/From Investing Activities
This cash refers to the net cash spent on property, equipment, or securities investments. Cash used in investing activities indicates a company’s investment in its growth and future operations. High spending may signal expansion, while low spending could suggest stagnation or focus on maintaining current operations and cash flow profitability.
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 50% to filter out companies where promoters have confidence, and long-term commitment of the founders or significant stakeholders in the company exists.
Market Capitalization
To limit ourselves to large-cap and mid-cap stocks, we will use a market capitalization filter of more than 10,000 crores.
Using the above filters for this scanner, we have obtained a list of promising large—and mid-cap stocks incurring huge capital expenditures.
Don’t forget
- This is a first-level filter aimed at giving you a good starting point in your search for large and mid-cap stocks undertaking huge capital expenditures and with expectations of high future growth. You can further analyze these stocks to ascertain if they are good businesses and command a seat in your investing portfolio.
- This scanner aims to find companies that are currently undertaking colossal capex. These asset-building expenditures will take time to reflect in sales, profits, and, eventually, in the stock price. Hence, it is advised to maintain a watchlist of such stocks and monitor other aspects of the company before making a decision to buy.
- Some companies are cyclical in nature, and you have to analyze their historical data to track their performance based on the nature of their business.
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How to Invest for Long Term
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Frequently Asked Questions
Shall I buy all the stocks from 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 capacity expansion companies. You can learn more about long term investing in Mr. Arvind Kothari’s How to Pick Stocks for Long Term course on Upsurge.club.
How can I learn more about investing in the right stocks?
Upsurge.club offers a range of courses on investing where you can learn everything from the basics to advanced strategies and idea generation methods. You can find them here.