Overall Idea

  • Avoid immediate trading post-result; monitor price behaviour instead.
  • Monitor for retracement and consistent trends
  • See quarterly result and shortlist high growth stocks
  • Fundamental Analysis is must because if the analysis is even wrong but fundamentals are strong then the loss will be minimal. So, less chance of being wrong.

Filter by Fundamentals

High Growth Criteria:

  • Quarterly sales growth YoY > 10%.
  • Quarterly profit growth YoY > 10%.
  • Sales and profit in the latest quarter should be the highest compared to previous quarters.

See percent change in growth of past 3 years

To avoid seasonal behaviour, use YoY growth%

Additional Filters:

  • Promoter holding > 51%
  • FII (Foreign Institutional Investor) holding > 2%: because they only invest in a company after thorrow research, even visit the company and based on lot of data.
  • Return on Capital Employed (ROCE) > 20%
  • Debt-to-Equity ratio < 0.5
  • Piotroski Score > 5 to measure company health
  • Market capitalization: Mid-cap and small-cap stocks (₹2,000–₹20,000 crore)

Manual:

  • See sales, operating margin and net profit should be (almost) all time high or showing nice momentum.
  • Operating Margin should be seen for last 2-3 quarters. it should not decrease significantly compared to previous quarters, not more than 2-3% fall.
  • Balance Sheet - Borrowing should be less
    • If borrowing is increasing(with or without reason) then its impact will be visible in long term, so avoid in short term.
Share Holding Pattern:
  • Should be strong promoter holding. Sometimes promotor has to focrefully sell according to regulations, so see such things. See if promotor and FII/DII are exchanging holdings then its ok even one of em has decreased, because another is increased.

Screener Screen Parameters

YOY Quarterly sales growth  > 10 AND
YOY Quarterly profit growth  > 10 AND
Promoter holding > 51 AND
Market Capitalization > 2000 AND
Market Capitalization < 20000 AND
FII holding > 2 AND
Return on capital employed >20 AND
Debt to equity < 0.5 AND
Piotroski score >5

Technical Parameters:

  • After result is declared then the price should increase.
  • If the stock has already given run-up(30-40%) after result then wait for retracement till the price reaches its next support and now the support should be previous high.
  • Book profit when the target is reached, if it is looking like it will still go up then exit only 50%.

Example

  1. Example stock: Tips Music (analysis done on 9th dec, 2024)
    • Quarterly sales and profits are at all-time highs.
    • Promoter and FII holdings are stable or increasing.
    • Post-result, the stock rises >20%, retraces ~15%, and RSI stays above 50.
    • Entry is made on retracement; exit at the previous high or based on stop-loss/EMA strategy.

Questions

  • TTM - Expected growth. How is the expected geowth calculated?

References