Stock Analysis in PMS:
✅ Key Parameters for Fund Managers
A Portfolio Management Services (PMS) fund manager analyzes stocks using multiple factors to build a strong, high-return portfolio. At Aastha Fintech, we focus on a disciplined approach to stock selection based on the following key parameters:
1. Fundamental Analysis
a) Financial Metrics:
• Revenue Growth – Consistent top-line growth indicates a strong business.
• Profitability Ratios – Net profit margin, operating margin, and return on equity (ROE) highlight efficiency.
• Debt Levels – Debt-to-equity and interest coverage ratios help evaluate financial stability.
• Cash Flow – Strong operating cash flow signals a company’s ability to sustain itself.
• Earnings Per Share (EPS) Growth – A rising EPS is a good indicator of profitability.
b) Valuation Metrics:
• Price-to-Earnings (P/E) Ratio – Compares stock price to earnings; lower P/E suggests undervaluation.
• Price-to-Book (P/B) Ratio – Indicates if the stock is trading below its intrinsic value.
• Enterprise Value to EBITDA (EV/EBITDA) – Helps compare companies with different capital structures.
• Discounted Cash Flow (DCF) – Estimates future cash flows and intrinsic value.
c) Management & Corporate Governance:
• Promoter Holdings – High promoter stake with low pledging is a positive sign.
• Board & Leadership Quality – Experience and ethical track record of management matter.
• Capital Allocation Efficiency – Evaluates how well profits are reinvested or distributed.
2. Technical Analysis
Used for timing entry and exit points:
• Price Trends & Moving Averages – 50-day and 200-day moving averages show momentum.
• Relative Strength Index (RSI) – Measures overbought or oversold conditions.
• Support & Resistance Levels – Helps in setting price targets.
• Volume Analysis – Confirms strength of price movements.
3. Macroeconomic & Industry Analysis
• Economic Indicators – GDP growth, inflation, interest rates, and currency trends affect stock prices.
• Industry Growth Trends – Sector tailwinds and regulatory changes impact stocks.
• Commodity & Raw Material Prices – Cost fluctuations affect profit margins.
4. Risk Analysis
• Beta & Volatility – Measures stock price sensitivity to the market.
• Liquidity Risk – Stocks with low trading volumes can be difficult to exit.
• Concentration Risk – Overexposure to a single stock or sector can be risky.
• Corporate Governance Risk – Poor governance can lead to financial irregularities.
5. Portfolio Construction & Monitoring
• Diversification – Balancing across sectors and market caps to reduce risk.
• Asset Allocation – Adjusting weightage based on market cycles.
• Performance Tracking – Regular review vs benchmarks like NIFTY 50, BSE 500.
By using a combination of these parameters, PMS fund managers ensure strong portfolio performance.
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