Finding a good SME company is like finding” a Needle in a Haystack”
1. as there are approx. 800 listed SME companies as per screener .So I used screener to filter the best ones in this correction phase of the market .
2. I excluded all loss making companies .While profit can be fudged but cash flow cannot be .Hence I took last 3 years cash flow divided by this years PAT ,if this is a negative number I have excluded those companies(NOT saying at all that ALL negative ones are bad companies or fudged ) .
3. Sustainable ROE is key for value creation for shareholders in long run ,hence have taken last 3 years ROE and last year ROE as 20% pa as threshold for my FINAL LIST .
4. So on quantitative factors these companies are ONE OF THE BEST ones ,doing well in SME space .
5. Some key findings :
a. The list now reduces to only 12% companies (around 90only )
b. Their current average PE is 27 and forward average PE is only 15 (current qtr multiplied by 12 /market cap ) where as share price drop from ATH is 46!
c. Average sales growth CAGR for last 3 years and 1 year is mindboggling 56 % &39%
d. .Average profit growth for last 3 years and 1 year is jaw dropping 136 % & 88% .
e. The BEST indicator as per me ROE for 3 years is whopping average of 37% and 39% last yea,r trading at trailing average PE of 27 !!