The 13th edition of the freefincal stock analyzer now auto-generates Hewitt Heiserman Jr.’s Earnings Power Box, thank to efforts of Rs. Srivatsan, who explained how to identify good business from bad one using it in yesterdays guest post: It’s Earnings That Count: Forget the next Infy; Can you identify the next Satyam? The automated stock analyzer pulls financials from morningstar, stock price history from moneycontrol and calculates intrinsic value in six different ways, along with Dupont analysis, Graham number, Piotroski and Altman Z-scores for financial health.
If you have not read Srivatsan’s post, please do so before reading any further. In order to ensure the calculation is based on data from a single source, Srivatsan has made some reasonable modifications to the formulae mentioned in his post. Although the earnings power box can be generated with data from morningstar in under 20 seconds, the tool is only meant for users who spend a lot longer in studying and interpreting the data.
Like any stock analysis, this tool comes with assumptions and it is important to understand them and change them as per sector or company.
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.
This is based on: Earnings Power Valuation Model (doc file).
Srivatsan has defined enterprising and defensive EPS as follows:
Enterprising EPS = (Enterprising Income)/(Shares Outstanding)
Defensive EPS = (Defensive Income)/(Shares Outstanding)
Enterprising Income = Net Income – (15% x total capital)
15% here is the weighted average cost of capital (WACC) and is an expected return. You can modify this for each FY and for each stock.
15% x total capital = enterprising interest.
Defensive Income = Free Cash Flow – change in working capital since last FY.
Srivatsan will explain more about these assumptions and limitations (everything has them) in a couple of days.
Earnings Power Box Gallery
I went crazy and fooled around with the sheet. Here are a few examples. Please remember that this tool is not for those who do not understand what the above definitions stand for. Do not take the graphs on face value. Context matter and always evaluate a stock in multiple ways.
The automated stock analysis sheet
- pulls financials from morningstar and analyzes them
- pulls adjusted stock price history from money control, and
- calculates intrinsic value six different ways!
It also pulls annual (standalone/consolidated) and quarterly financials from Value Research online.
Valuation models available:
1) Price Multiple Model
2) Sustainable Growth Rate
3) Book Value Growth Rate (Buffett’s approach to valuation)
4) Discounted Cash Flow(DCF)
5) Reverse DCF Valuation
6) Graham formula and Graham number
7) Piotroski Score for the last 9 financial years
8) Earnings Growth Estimate.
9) Automated Return on Equity Analysis with the Dupont Formula
10) Altman Z-score
Kolkata DIY Investor Workshop May 28th 2017
You Can Be Rich Too With Goal-Based Investing
is a book that I have co-authored with PV Subramanyam. if you have not yet got the book, check out the reviews below and use the links to buy.
Gift it to your Friends and Relatives whom you care more. Already follower of Pattu and Subra’s forum. Ordered 4 more copies to give gift to my friends and eagerly waiting to read
The best book ever on Financial Freedom Planning. Go get it now!
Your first investment should be buying this book
The (nine online) calculators are really awesome and will give you all possible insights
Thank you, readers, for your generous support and patronage.
Amazon Hardcover Rs. 317. 21% OFF
Kindle at Amazon.in (Rs. 307)
Infibeam Now just Rs. 307 24% OFF.
If you use a mobikwik wallet, and purchase via infibeam, you can get up to 100% cashback!!
Amazon.com ($ 3.70 or Rs. 267)
Google Play Store (Rs. 244.30)
- Ask the right questions about money
- get simple solutions
- Define your goals clearly with worksheets
- Calculate the correct asset allocation for each goal.
- Find out how much insurance cover you need, and how much you need to invest with nine online calculator modules
- Learn to choose mutual funds qualitatively and quantitatively.
More information is available here: A Beginner’s Guide To Make Your Money Dreams Come True!
What Readers Say
Connect with us on social media
- Twitter @freefincal
- Subscribe to our Youtube Videos
- Posts feed via: Feedburner
- We are also on Google Plus and Pinterest
Do check out my books
Get it now. The Kindle edition is only Rs. 199.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You WantMy second book is now only Rs 199 (Kindle Rs. 99) Get it or gift it to a young earner
The ultimate guide to travel by Pranav SuryaThis is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for ₹199 (instant download)
Free Apps for your Android PhoneAll calculators from our book, “You can be Rich Too” are now available on Google Play!
Install Financial Freedom App! (Google Play Store)
Install Freefincal Retirement Planner App! (Google Play Store)
Find out if you have enough to say "FU" to your employer (Google Play Store)