Fundamental Analysis Guide for Blue Chip Stocks (NPM, ROE, DER)

    Hello everyone. Let's meet again. Welcome to the "Talking About Money" article. In this article, I would like to explain how to pick stocks based on performance. This article is perfect for those just getting into the world of stocks. Also, for those who are still confused and don't know how to pick good stocks? All right, let's get started. In general, there are two types of data approaches that can be used to determine whether a particular company is doing well. The first is HISTORICAL DATA and the second is FORECAST DATA. Simply put, HISTORICAL DATA is data derived from conditions that have occurred in the past.

Fundamental Analysis Guide for Blue Chip Stocks (NPM, ROE, DER)

    For example, company financial statements, company performance, ability to pay company debt, quality of management, etc. Now, if we look at the historical data, we can see companies that have consistently performed well. Developing condition for many years. And we hope the company achieves the same or better results in the future.

    FORECAST DATA, on the other hand, is data that can be viewed as predicting future business conditions from current information. For example, increasing or decreasing the reference interest rate in relation to monetary policy. A rise or fall in interest rates will affect several related industries, especially those related to high lending rates.

    From there, can you predict which industries and companies will be affected, and what impact will it have on the company's position in the future? In short, if you look at past data. We are looking for companies that have performed well in the past. But when I look at the FORECAST DATA. While a particular company may have had mediocre or poor past performance, its future prospects are good.

    Before I go into more detail on how to pick stocks for companies that are doing well, I will first tell you that there are many data and methods you can use to determine if a company is doing well, starting with a financial review. Coverage, news, securities research results, company visits, etc. In this article, we will first explain how to pick stocks of strong companies in an easy-to-understand manner.

    For those of you new to the world of stocks to understand. As a beginner, it can be confusing as to which company's stock is doing well. Maybe because you have a lot of restrictions. For example, you don't know how to read financial statements that you can't access, or you don't have the opportunity to visit the company.

    Start small with what you can achieve and learn. Beginners can learn from the data available on equity platforms such as RTI Business and Stockbit, as well as securities platforms. To find out if a particular stock is good, you can use his three metrics: net profit margin, return on equity, and debt to equity ratio.

    Huh, what is that? Let's discuss them one by one. Oh yeah, these three metrics can be viewed as an approach using historical data. Ok, let's talk about that in a second. The first metric is net profit margin or commonly abbreviated as (NPM). Before I talk about net profit margins, I want to talk briefly about the earnings of the company.

    In a nutshell, business income is the amount a company earns after conducting business. Does the higher the company's income, the better the company? I don't know the answer. Because the company's income is big, but it is not certain whether the company can also make a big profit. Or it can be a big income, but it can also be a loss because the expenses are big.

    Therefore, to see if the company is good, the company's income should be compared to, for example, the company's net income or equity. Now back to net profit margin or NPM. Simply put, NPM is a measure that compares a company's income to its ability to generate profits.

    This NPM itself can be obtained by calculating the company's net profit or by dividing the net profit by the company's sales and multiplying by 100%. For example, company A has sales of $100 billion and net income of $10 billion. So NPM is 10%. So from these calculations we can see that Company A makes a 10% profit on revenue.

    Really, looking at a company's NPM number looks really easy... But don't get me wrong. Looking more closely, can NPM itself tell us about the company's efficiency? How can the company's business decisions bring in money? Can the company manage expenses properly? Do you have? The higher the NPM number, the more efficiently the company can raise capital and reduce expenses.

    Oh yes, the NPM number itself can be easily viewed on various securities and equity platforms such as RTI Business and Stockbit. For example, BCA's NPM is currently 33.4 percent, Astra International's NPM is 8.98 percent, Unilever's NPM is 17.22 percent, and so on.

    What is ROE? Simply put, ROE is a measure that compares a company's net income with the company's net worth. That's right, net worth, also called equity, is obtained by calculating the company's total assets minus the company's total liabilities or liabilities. Return to ROE. This ROE can be calculated by dividing the company's net income by the company's equity and multiplying by 100%.

    For example, Company A had previously made his 10 billion profit. Now let's say the company has a capital of 100 billion. Therefore, the company's ROE is 10%. This means that the company can make a profit of 10% compared to the company's stock or net capital or net assets. Therefore, if a company's ROE is 10%, it can be said that the company can handle 1 rupiah of net capital becoming 1.1 rupiah.

    In this way, you can also assess how well your company can best manage its resources. It can be said that the higher his ROE of a company, the more efficiently he manages the company's resources. Now let's talk about what a good ROE number is. In my personal opinion, there are no universal limits that can be used as a guide. One way to determine whether a company is performing well is to compare the company's ROE with other companies in the same industry. Apart from that, there are also other methods that can be used to determine if a company's ROE is good. That is, by comparing a company's ROE to the return on investment in other commodities. Compare, for example, the Indonesian benchmark interest rate or the 10-year bond yield. For example, at the beginning of 2020, the main interest rate was 5%. A company with an ROE of 5% or less will actually give you a better return if you put it in a savings account because you think it's easier than investing in that company's stock. The same applies to bond yields. If his ROE of the company is lower than the bond yield, then it would be better to invest the money in bonds. However, you are free to compare his ROE to benchmark interest rates, bond yields, etc. You also have the right to choose where you invest. To be on the safe side, choose the best investment vehicle that fits your risk profile. Here, the last indicator, Debt to Equity Ratio or commonly abbreviated as DER.

    In other words, DER is a measure that compares the value of a company's liabilities to the value of the company's net assets. I mentioned a little bit about the company's net worth in the discussion of the earlier point. If you're not sure, try playing the article again. Now go back to DER. The definition of DER itself is the company's debt amount divided by the company's net worth or equity, multiplied by 100%. For example, Company A has $150 billion in debt and Company A has $100 billion in equity. Therefore the DER is 150%. This means that the value of the company's debt is 150% compared to the company's equity or net assets. Therefore, looking at a company's DER, we can determine that the higher the company's DER, the higher the company's leverage ratio compared to its equity or net worth. So, you might be wondering how much DER is he reasonable? In my opinion, the DER number itself is not suitable for this kind of generalization. As you can see, every sector of the business industry has different debt requirements. In my opinion, the best way to assess this DER is to compare a company's DER to other companies in the same industry. For example, compare the debt ratios of PT Pakuwon Jati, a real estate company. Therefore, the debt ratio can be compared with other real estate companies such as PT Alam Sutera Realty, PT Ciputra Development and PT Summarecon Agung. On the other hand, I would also like to emphasize that a high debt ratio is not necessarily a bad thing. This is both good and natural when debt management is good, it is used productively, and the company's ability to repay its debts is also good. Now, I would like to summarize what we have talked about so far. First, NPM has demonstrated the company's ability to generate revenue while reducing costs. The second is her ROE, which reflects how effectively a company manages its resources.

    The third is DER, which shows how a company's debt ratio compares to its equity or net assets. Well, that's all I want to talk about this time. I hope you found this article useful. Before wrapping up this article, remember that NPM, ROE, and DER are just three of the many data you can use to assess whether a company is performing well.

    There are many other indicators you can use to determine if a company's stock is worth buying. So keep learning and check out our Talk About Money articles. Oh yeah, if you have anything you want to ask or want to discuss, please write it in the comment section. Also don't forget to like, subscribe and turn on the notification bell so you don't miss the best videos about the world of finance from us.

    See you in the next article. There are endless things to talk about money, so stay tuned for articles that talk about money!

Location:

Berbagi :