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π Market Kya Lagta Hai
Nifty 50 π’ +0.73%
Midcap 150 π» -0.24%
Smallcap 250 π» -0.19%
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Sectors in Focus
Major Corporate Developments This Week
- Oriental Rail: Company secured orders worth 193.4m rupees from rail coach factory
- Oriana Power: Company gets new order worth Rs 155 crore for 40 MWp solar plant in Rajasthan
- RVNL: Company emerges lowest bidder for a project worth βΉ202.87 crore of South Eastern Railway.
- Shilpa Medicare: Company unit's Raichur API facility in Karnataka clears GMP inspection conducted by Brazil regulatory agency
- KDDL: Approval of Buyback through βTender offerβ route at Rs 3700/Sh
- Waaree Renewable: Company secures 412.5 MW solar project in Rajasthan
- Adani Ports: Company get LoI for developing and operating Berth No. 13 at Deendayal Port in Gujarat with a concession period of 30 years.
- Havells: Company is planning expansion of manufacturing capacity of cables at Alwar plant
- Mahindra & Mahindra: Company cuts prices of top-end variants of XUV7OO SUV by almost Rs 1 lakh.
- KPI Green Energy: Company signs 50MW hybrid power purchase deal with Gujarat Urja Vikas Nigam.
- Diamond Power: Company wins order worth 409 Cr Rupees from Adani Green.
- Torrent Power: Company in pact with ARSS teeks and Torrent Urja 14 for setting up 50 MWp solar projects in Tamil Nadu
- Lupin: Company gets tentative U.S. FDA approval for ANDA of Empagliflozin
- HFCL: Company's Netherlands unit incorporates subsidiary in the U.K. for making optical fibre cable
- Pitti Engineering: Company opens QIP for raising up to Rs 360 crore, sets floor price as Rs 1,054.25/share
- VA Tech Wabag: Company approved sale of 100% stake in wabag water services S.R.L, Romania, deal for EUR 1.2M
- Jupiter Wagons: Company opens QIP, sets floor price at βΉ689.47/share.
- PCBL: Company gets patent for invention titled 'hybrid carbon black grade comprising graphene to improve performance of rubber compound
- JSW Energy: Company announced plans for a capital expenditure of Rs 15,000 crore in the current financial FY25.
- Zydus Life: Company receives final approval from USFDA for sacubitril and valsartan tablets. US sales of Approx 5.5B.
TechnoFunda Investing Quote from Legends -
Jesse Livermore's quote emphasizes the importance of patience and confirmation in trading. He advises traders to wait for the market to validate their analysis before taking action. By doing so, traders can reduce the risk of acting on premature or incorrect assumptions. This approach suggests that it is better to enter a trade slightly later, ensuring the trend or movement is genuinely aligned with their expectations, rather than rushing in and potentially making costly mistakes. Livermore's advice highlights the value of disciplined and cautious trading, where waiting for clear signals can serve as a form of insurance against hasty decisions.
π Book I'm Reading This Week
The book narrates Jesse Livermore's ascent from a "boy plunger" to the most influential speculator on Wall Street. While much of the book is devoted to Livermore's experiences, a larger part of the book deals with trading wisdom and rules that Livermore imparts through Lefevre. Years later, many trading and investing books repeat the very same rules first enunciated by Livermore in Reminiscences, such as: go with the trend; no stock is too high to buy or too low to sell; let your winners run and cut your losses short; make your own decisions; and market history repeats itself. The enduring appeal to the book rests in Livermore's view that the market is made up of people and the excesses of the market reflect mass psychology and the mistakes of individuals are frequently the result of the inability to control fear and greed. Thus, the views and lessons of Livermore continue to be relevant to every new generation of investorsnd traders.
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TechnoFunda 101 - Power Capsules
Learn technical as well as fundamental concept in a simple way
Understanding Inventory Turnover Ratio
Inventory turnover ratio is a critical measure of a company's efficiency in managing its inventory. It provides insights into whether the company is effectively using its inventory to generate sales. Efficient inventory management is vital as it encompasses all stages, from purchasing raw materials to converting them into finished goods and delivering these goods to customers. Any misstep in this process can significantly impact the company's financial health.
Importance of Inventory Management
Effective inventory management is crucial for businesses. Consider a car manufacturer with a factory in Delhi selling cars in Chennai. If customers in Chennai buy 100 cars daily, the manufacturer needs to transport 100 cars daily from Delhi to Chennai. If the journey takes four days, 400 cars will always be in transit, representing significant money tied up in inventory.
Now, imagine this manufacturer serves 100 major cities across India. The number of cars in transit and the associated costs would be enormous, potentially amounting to thousands of crores. Reducing these costs through better inventory management can free up significant capital for other uses, enhancing shareholder value.
Strategies like setting up multiple manufacturing plants, adopting faster and cheaper transportation modes, and just-in-time (JIT) inventory systems help companies minimize inventory costs.
Calculating Inventory Turnover Ratio
The inventory turnover ratio (ITR) is calculated using the formula:
ITR = Sales / average of inventory at the start of the year and the end of the year
For example, if a company has sales of βΉ100 and an average inventory of βΉ20, its ITR is 5. This means the company cycles through its inventory five times a year. This ratio can also be expressed in days:
Days of inventory = (365 / inventory turnover ratio)
In the example above, the company has 73 days of inventory, meaning it keeps about 73 days' worth of sales in stock.
Significance of Inventory Turnover Ratio
- Higher Inventory Turnover: Indicates efficient inventory management, requiring less capital tied up in inventory.
- Lower Inventory Turnover: Suggests inefficiencies, with more capital tied up in inventory.
Using ITR in Stock Analysis:
- Absolute value of inventory turnover ratio of the company and judge whether its business model would require a large amount of money for growth. A company with a higher inventory turnover ratio would need lesser investment in its inventory when it grows whereas a company with lower inventory turnover ratio would need higher investment.
- Trend Analysis: Tracking a company's ITR over time reveals if its inventory management is improving or deteriorating.
- Industry Comparison: Comparing a company's ITR with its peers provides insights into its efficiency relative to competitors. A lower ITR compared to peers may indicate inferior management or production technology.
- Benchmarking: While ITR varies across industries, manufacturing companies typically have an ITR of 6 to 8, reflecting a raw material to finished goods conversion time of 1.5 to 2 months. However, this is a rough benchmark, and significant deviations may suggest unique inventory management practices or inefficiencies.
In summary, the inventory turnover ratio is a vital metric for investors to gauge a company's inventory management efficiency and its impact on financial health. By understanding and analyzing ITR, investors can make informed decisions about the company's operational efficiency and potential for growth.
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Keep Compounding...
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Vivek Mashrani, CFA
Founder, TechnoFunda Investing
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