11 – Current temptation, future frustration

The eleventh part of the Series is “Current temptation, future frustration”. This series is based on the companies which are currently darling of the market and many trying to catch such opportunities but it has a probability to become a reason for future frustration. It can wipe out the majority of gains in wealth. I am trying to put some of the number-crunching facts by which we can identify ongoing issues in the companies and can be saved our wealth.

I am starting this article with one of the company which is engaged in the business of providing IT Consulting and Software Development Services has a 52 weeks low price of Rs.1.68 and LTP is Rs.7.59. This company has rewarded ~4.52x of return in a year.

Let’s start looking at the numbers.

We can see that sales of the company keeps falling losses at the operating level and not earning profits.

We can see that higher receivable days and lower payable days where we can say that almost 3.96 years of receivables.

The company has ~87% & 89% of other current assets to staff advances in FY21 & FY20 respectively. These advances keep growing and do not get repaid.

We can see that lower return ratio and worsen over a period as financial worsening. Also, the company has worsened with the worst performance.

We can see that majority of borrowings from related parties and interest expenses are very lower still the company cannot able to perform well.

This entire series is based on past available data and ignored the future development in companies and the stock market always looks at the future.

Leave a Reply