earnings strength comparison jun 2007

Earnings Strength Comparison

(ESC)

What is Earnings Strength?

Earnings per Share (EPS) Growth is a key

indicator of a company’s financial strength

Stand-out stocks should have:

Sound earnings growth record in recent years

Strong current earnings record in last few quarters

“Momentum in Earnings Growth” is the key to

stock performance

Companies with high current earnings growth

Stable or accelerated record of earnings growth

“Momentum in Earnings Growth” is reflected in

high Earnings Strength

What is Earnings Strength

Comparison (ESC)?

ESC benchmarks companies in relation to a chosen

universe of about 410 stocks, on the basis of their

Earnings Strength

It will help identify companies displaying momentum

in earnings growth…EARLY!

Identification of companies with strong / weak

earnings growth will serve as a powerful filter for

stock picking

ESC is useful for investors who would like to keep

tabs on a fairly large universe of stocks on a

fundamental basis

It is a part of our Alternative Research effort which

complements our Fundamental Research.

What is the basis for ESC?

Tracking momentum in earnings growth helps

identify stocks for investment in their early

stages of growth

Historical analysis indicates that markets wait

for a couple of quarters of sustained earnings

growth before re-rating a stock upwards

High momentum stocks tend to become multi-

baggers over time

How do we do this?

Based on their turnover and market capitalization, we

have selected about 410 stocks

We have then captured their historical earnings

information to generate various parameters of earnings

growth

Companies are ranked from 0 to 100 based on their

relative earnings growth performance, with a higher

rank signifying higher growth

We have also filtered stocks with sustained

momentum, acceleration or deceleration in earnings

growth

Product Details

Currently, the ESC generates the following

information:

Sectoral Snapshot

Accelerating Growth companies

Companies with sustained momentum

Companies sustaining a turn-around

Decelerating Growth companies

Earning Score Ranker

Next

Sectoral Snapshot

Sustained

Momentum

Sectors

Accelerating

Sectors

Decelerating

Sectors

Mar-07 Dec-06 Sep-06 Mar-07 Dec-06 Sep-06

Power 60 45 41 40 23 11

Pharma Indian 62 33 52 46 5 26

Oil & Gas 54 64 33 29 58 1

Consumer Discretionary 53 48 35 28 27 3

Media 59 68 44 38 75 16

Pharma MNC 47 28 34 20 (2) 2

IT 64 58 53 51 46 26

Telecom 41 65 33 9 61 (5)

Banking & Finance 59 49 52 38 27 26

Engineering & Capital Goods 55 59 59 31 47 34

Cement & Construction 68 76 80 56 100 100

FMCG 48 42 42 23 20 11

Chemicals & Fertilizers 41 30 37 11 2 6

Paper & Packaging 58 62 54 37 54 28

Auto & Auto Ancillary 47 52 50 21 31 25

Travel & Tourism 68 36 76 56 10 77

Shipping 23 21 36 (25) (15) 5

Metals & Mining 52 55 66 28 41 48

Misc 44 64 61 15 56 36

Retail 35 76 63 1 98 40

Sugar 10 10 21 (85) (62) (29)

Textiles 31 52 52 (8) 34 26

Median YoY Growth Rank Median YoY Growth (%)

Accelerating Growth Companies

Consistent increases in growth over the last three quarters, without

negative growth

Companies with increasing growth numbers tend to show an

improvement in growth ranks

Co Name Sector Mar-07 Dec-06 Sep-06 Mar-07 Dec-06 Sep-06

Wyeth Pharma MNC 98 87 35 531 168 3

Godfrey Phillips FMCG 97 41 35 454 19 3

Apollo Tyres Auto & Auto Ancillary 88 83 36 119 113 4

Flat Product Equipments Engineering & Capital Goods 95 90 43 354 240 15

CMC IT 88 72 40 129 79 9

Omax Autos Auto & Auto Ancillary 88 52 46 116 33 19

Vardhman Spinning Textiles 99 85 59 1,010 138 33

Bhatinda Chemicals Chemicals & Fertilizers 95 76 57 349 100 29

ICI (India) FMCG 94 91 60 273 250 33

LIC Housing Finance Banking & Finance 87 51 57 115 31 30

YoY Growth Rank YoY Growth (%)

Sustained Momentum

Companies which have ranked higher than 75 (highest quartile) in each of

the last 3 quarters

These are usually companies which have sustained high earnings growth


India Cements Cement & Construction 98 99 99 474 1,009 2,180

Kesoram Inds. Cement & Construction 91 100 99 162 1,507 2,632

United Spirits FMCG 93 94 98 202 414 916

Moser Baer (I) IT 100 88 97 11,249 188 743

Madras Cement Cement & Construction 87 97 96 115 610 379

Nava Bharat Vent Metals & Mining 89 98 87 133 796 150

JK Lakshmi Cement & Construction 90 94 89 157 387 175

CEAT Auto & Auto Ancillary 95 97 80 375 488 100

JSW Steel Metals & Mining 91 87 93 167 160 226

Aurobindo Pharma Pharma Indian 86 85 99 108 129 1,400

YoY Growth Rank YoY EPS Growth (%)

Sustained Turn-around

Companies which have turned around from losses in each of the

last two quarters, i.e. losses in corresponding two quarters last year

and profits in current year


T N Petro Prod. Chemicals & Fertilizers 79 76 - 100 100 (100)

Mangalore Ref. Oil & Gas 79 97 5 100 512 (94)

Zee Telefilms Media 79 86 15 100 145 (51)

Phillips Carbon Chemicals & Fertilizers 79 76 80 100 100 100

Ispat Inds. Metals & Mining 79 76 80 100 100 100

ING Vysya Bank Banking & Finance 79 89 84 100 194 110

Dr Reddy's Labs. Pharma Indian 79 98 88 100 827 153

Bank of Maharashtra Banking & Finance 79 88 96 100 178 392

Bank of Rajasthan Banking & Finance 79 82 98 100 106 952


Decelerating Growth Companies

Companies with a consistent fall in growth over the last three

quarters


Asahi India Glass Auto & Auto Ancillary 9 95 100 (87) 439 3,270

Consolidated Photo Products LtdConsumer Discretionary 8 13 99 (96) (48) 1,154

J K Synthetics Cement & Construction - 76 80 (100) 100 100

United Phosp. Chemicals & Fertilizers 10 82 90 (85) 103 182

Mysore Paper Paper & Packaging - 76 80 (100) 100 100

Finolex Cables Telecom 15 59 95 (58) 49 277

Sai Service Auto & Auto Ancillary 9 84 86 (86) 117 119

United Breweries FMCG 16 54 93 (45) 37 225

Indian Oil Oil & Gas 19 76 93 (40) 100 221

Tata Tea FMCG 15 60 88 (57) 51 163


Top Earning Score Rankers

Companies gaining top Earning Score Rank in the Quarter

Z-Score Rank

Co Name Sector Mar-07 Mar-07 Dec-06 Sep-06 Mar-07 Dec-06 Sep-06

Whirlpool India Consumer Discretionary 100 99 - - 755 (100) (100)

Bhatinda Chemicals Chemicals & Fertilizers 99 95 76 57 349 100 29

Flat Product Equipments Engineering & Capital Goods 99 95 90 43 354 240 15

HCL Infosystems IT 99 96 64 25 402 56 (14)

Divi's Lab Pharma Indian 99 94 70 79 341 73 96

CEAT Auto & Auto Ancillary 98 95 97 80 375 488 100

H D F C Banking & Finance 98 53 46 49 29 25 23

Hind. Organic Chem. Chemicals & Fertilizers 98 99 76 - 666 100 (100)

Voltas Consumer Discretionary 98 89 69 59 141 71 33

Escorts Auto & Auto Ancillary 97 79 - - 100 (100) (100)


Earnings Score A Comprehensive measure of strength

We have developed a measure that

Rewards companies displaying strong growth

Punishes companies with a history of volatile growth

In essence, it captures surplus earnings growth

Earnings Score calculates how much the current earnings

growth deviated from the norm

Earnings Score = (ei – m8)/s8

where, ei is the EPS growth m8 is the average of last 8 ei

s8 is the std deviation of last 8 ei

Caveat Emptor

ESC does not combine price-valuation filters along

with screens for attractive growth to identify top picks

ESC does not cover all stocks, but only a basket

selected by us for their turnover and market

capitalization

Data is captured only for companies which have

declared results by the end of the month after the

quarter ending month, e.g. by Feb 03, 2007 for the Dec

2006 ESC

For companies reporting losses in any particular

quarter, EPS is taken to be zero

Thank You !

DISCLAIMER

This e-mail message may contain confidential, proprietary or legally privileged information. It should not be used by anyone who is not

the original intended recipient. If you have erroneously received this message, please delete it immediately and notify the sender. The

recipient acknowledges that Edelweiss Capital or its subsidiaries and associated companies, as the case may be, are unable to

exercise control or ensure or guarantee the integrity of/over the contents of the information contained in e-mail transmissions and

further acknowledges that any views expressed in this message are those of the individual sender and no binding nature of the

message shall be implied or assumed unless the sender does so expressly with due authority of Edelweiss Capital or its subsidiaries

and associated companies, as applicable. The message is not intended as an offer or solicitation for the purchase or sale of any

financial instrument/security or as an official confirmation of any transaction. Before opening any attachments please check them for

viruses and defects.

In case of queries please feel free to contact

Sunil Jain / Yogesh Radke

Edelweiss Capital

14th Floor, Express Towers,

Nariman Point,

Mumbai 400 021

Tel: 91 22 2286 4308

Fax: 91 22 2286 4240

earnings strength comparison jun 2007

Documents