50 stocks with solid earnings power: Ability to self-fund and create value

Published: April 1, 2018 at 11:00 am

Last Updated on December 28, 2021

Here are 50 stocks with excellent earnings power track record. Based on Hewitt Heiserman Jr.’s Earnings Power Box, these companies have the potential to self-fund and create value. You can download a free tool to analyze any stock of your choice. This excellent compilation has been put together by Lokesh Verma based on Automated Stock Analysis with the Earnings Power Box.

Disclaimer: The data presented below is for informational purposes only and should not be construed as investment advice. Please do your own research before investing. Neither Lokesh Varma nor I will be responsible for your losses or gains. Please take some time to read and understand the Pros & Cons of Finding Stocks with Earnings Power for Long-Term Profits before proceeding further.

What is Hewitt Heiserman Jr.’s Earnings Power Box?

This is a plot of two the Defensive EPS (earnings per share) vs Enterprising EPS


The idea is to spot where a company falls in.

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    This is based on: Earnings Power Valuation Model (doc file) and it was developed into an Excel calculator by Rs. Srivatsan. His guest post is a good starting point to understand the idea: It’s Earnings That Count: Forget the next Infy; Can you identify the next Satyam? Srivatsan has defined enterprising and defensive EPS as follows: Enterprising EPS = (Enterprising Income)/(Shares Outstanding) and Defensive EPS =  (Defensive Income)/(Shares Outstanding). Therefore,

    Enterprising Income = Net Income – (15% x total capital). Here 15% is the weighted average cost of capital (WACC) and is an expected return. Also,  15% x total capital = enterprising interest.

    Defensive Income = Free Cash Flow – change in working capital since last FY.

     About Lokesh

    Born & brought up in Chandigarh, Lokesh completed his  B-Tech in Electronics & engineering and got a full scholarship from French Embassy to pursue Masters in Project Mgmt in Paris/France. He has worked with GE-Healthcare, ABB and currently with a Swiss bank in Zurich. He started investing in the market during his 3rd year of engineering (2008)…learnt hard lessons..gradually improved his investing style. Now his focus is more on portfolio allocation and behavioural aspects of investing than specific stock picking. Still learning, he enjoys the process of investing more than investment!! Loves mediation, yoga and VBA. You can follow him on Twitter: @lukeloki. In fact, he had published the 50 stocks in a series of stocks and I requested him to share his analysis with us. Do thank him, if you benefit from this.

    The process to identify 50 stocks with solid earnings power

    The following is Lokehs’s email message, reproduced as it best describes his thought process.
    Many thanks for reaching out. I draw great inspiration from your work and happy to share with investor community with my little bit. As discussed, please find the attached list and its related 50 graphs.
    Top 50 gems: Stocks which have been consistently in Quadrant one (companies that self-fund and create value) for last 3 years (2015/16/17)….frankly I came out of 58 in total after analyzing approx 4500 scripts. Data Source: morningstar.in. The basis is your model (download link below).
    In addition to the earning power box graphs (Quadrants), I was also interested in some other basic ratios: ROE, D/E, dividend payout. I believe, these 3 are enough to have a good judgement on management capabilities and their integrity towards shareholders. So I added them in overall graphs. It adds more value to overall picture to end user.
    We all know Stock price = PE * EPS….where EPS is more tangible but PE is more psychological. I am always intrigued to know that how market decides on PE. Why some command higher ratio than others. Though, there are many factors (moat, sustainability, brand, reliability, trust) etc but how do you measure these qualities?
    I look this problem from another angle i.e. if a company is showing consistent/increasing FCF without debt/leverage or basically self-funding itself, it must be having listed qualities. As one says, action should speak louder than words. That is where Heiserman Earning power quadrant comes into the picture to identify such potential gems. But I also want to backtest this assumption of mine.
    Next steps: Based on this assumption that stocks which hit Quadrant 1 consistently sooner or later are recognized bythe market as top quality…I will backtest it using somemulti baggerss in last few years. Hopefully will come up interesting insights in near future.

    The 50 stocks with impressive earning power record

     This image which lists all 50 stocks was tweeted by Lokesh on March 28th. They are also listed in text format below.
    50 stocks with solid earnings power: Ability to self-fund and create value
    Accelya Kale Solutions Ltd
    Ajanta Pharma Ltd
    Asian Paints Ltd
    Atul Ltd
    Aurobindo Pharma Ltd
    Avanti Feeds Ltd
    Bajaj Auto Ltd
    Bajaj Corp Ltd
    Bodal Chemicals Ltd
    Britannia Industries Ltd
    Byke Hospitality Ltd
    Caplin Point Laboratories Ltd
    CCL Products India Ltd
    Colgate-Palmolive (India) Ltd
    Credit Analysis And Research Ltd
    Cummins India Ltd
    Cupid Ltd
    D B Corp Ltd
    Dabur India Ltd
    Dhanuka Agritech Ltd
    Dharamsi Morarji Chemical Co Ltd
    Divi’s Laboratories Ltd
    Dynavision Ltd
    eClerx Services Ltd
    Elantas Beck India Ltd
    Gabriel India Ltd
    Hawkins Cookers Ltd
    HCL Technologies Ltd
    Hero MotoCorp Ltd
    Hindustan Unilever Ltd
    Indo Count Industries Ltd
    Indraprastha Gas Ltd
    IST Ltd
    ITC Ltd
    National Fittings Ltd
    Orient Refractories Ltd
    PI Industries Ltd
    Pidilite Industries Ltd
    Ultramarine & Pigments Ltd
    V-Guard Industries Ltd
    Vinati Organics Ltd
    VST Industries Ltd
    Ybrant Digital Ltd
    Page Industries Ltd
    Procter & Gamble Hygiene and Health Care Ltd
    SNL Bearings Ltd
    Sonata Software Ltd
    Southern Magnesium & Chemicals Ltd
    Star Paper Mills Ltd
    Sun TV Network Ltd
    Symphony Ltd
    Tata Consultancy Services Ltd
    Tata Elxsi Ltd
    Kewal Kiran Clothing Ltd
    Marico Ltd
    Mayur Uniquoters Ltd
    Menon Bearings Ltd

    Earnings Power Box graphs for the 50 stocks

    Five graphs are shown below. The rest are available as a slide show.

    Download Earning power box analysis tools

    Automated Earnings Power Stock Analysis With Screener.in data

    Automated Stock Analysis with the Earnings Power Box with MorningStar data

    U.S. Stock Analysis Spreadsheet


    Lokesh Varma and R. Srivatsan for generously sharing their expertise with all of us. Hewitt Heiserman Jr for a fantastic analytical method. He has used the US version of the above tool and is impressed with it. Kudos to Srivatsan. If you find this useful, please thank Lokesh. A gentle reminder to pay heed to the disclaimer mentioned above.

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