Stocks to buy: Consider stocks with healthy return ratios; 5 stocks with up to 39.3% upside potential
Substantial FPI outflows, weak September quarter results, and high valuations have driven the recent market correction. A JM Financial report highlights slowing urban demand across FMCG, retail, auto and mall sectors, based on the September quarter earnings from 157 companies. Demand moderation is seen in chemicals and consumer durables, while the financial sector shows stress in unsecured portfolios of MFIs, certain private banks and NBFCs.
The beat-to-miss ratio has been adverse so far, with 150 companies out of 268, or 56%, reporting earnings that are less than the estimates compiled (for more than two analysts) by Reuters-Refinitiv. Experts expect volatility to persist, but remain optimistic about long-term growth. Higher government spending and festive season consumption are expected to boost India Inc.’s earnings in the second half of 2024-25.
With markets likely to stay volatile, investing in high-quality companies is key. Efficiency—a company’s ability to maximise output (products, revenue or profits) using minimal resources—can help identify such firms. It reflects how effectively a business converts time, effort, materials and capital into results.
Return ratios are a key measure of a company’s efficiency, showing the returns generated on invested capital. Common ratios include return on equity (RoE), return on capital employed (RoCE), and return on assets (RoA), typically expressed as percentages. Higher ratios indicate better capital efficiency. RoE measures how much a company earns on its equity
