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
Co Name Sector Mar-07 Dec-06 Sep-06 Mar-07 Dec-06 Sep-06
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
Co Name Sector Mar-07 Dec-06 Sep-06 Mar-07 Dec-06 Sep-06
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
YoY Growth Rank YoY Growth (%)
Decelerating Growth Companies
Companies with a consistent fall in growth over the last three
quarters
Co Name Sector Mar-07 Dec-06 Sep-06 Mar-07 Dec-06 Sep-06
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
YoY Growth Rank YoY Growth (%)
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)
YoY Growth Rank YoY Growth (%)
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 !
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