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Housing Development Finance Corporation Ltd. | HDFC | NSE - Finance - housing
INR in Million. Fiscal year ends in March. Figures are consolidated and restated.
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Profitability Ratios
Gross, Operating, Net Profit Margin
The most important ratio is Net Profit Margin percentage or Net margin. It tells us how much out of every sale HDFC gets to keep after everything else has been paid for. It is highly variable from one industry sector to another. An ideal company has consistent profit margins.
Gross Profit Margin = ( Revenue - Cost of Revenue ) / Revenue
Net Profit Margin = Net Income / Revenue
Net Profit Margin = Net Income / Revenue
Return on Assets and Return on Equity - Housing Development Finance Corporation Ltd.
Return on assets tells you what percentage of every dollar invested in the business was returned as profit. It simply shows how effective the company is at using those assets to generate profit. Avoid investing in a financial company whose ROA is below 1%.
Return on equity measures the percentage of profit we make for every dollar of equity invested in the company. Ideally a financial company should have an ROE above 10%.
Return on Assets = ( Net Income - Preferred Dividend ) / Total Assets
Return on Equity = ( Net Income - Preferred Dividend ) / Shareholder's Equity
Return on Equity = ( Net Income - Preferred Dividend ) / Shareholder's Equity
NPA Ratio - Housing Development Finance Corporation Ltd.
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NPA ratio is used to measure the asset quality of the company's loan books. NPA are those assets for which interest is overdue for more than 3 months. Net NPA ratio above 1% is not healthy. If the NPA ratio for the last 10 years stays below 1% then that is a sign of good management.
Overall Performance
Company Performance
Watch the overall performance of revenue and profit, needless to say you should invest in a company whose numbers are going up.
Net Income & Cash from Operations
Operating cash flow is a better metric of a company's financial health for two main reasons. Cash flow is harder to manipulate than net income (although it can be done to a certain degree). Second, "cash is king", a company that does not generate cash over the long term is on its deathbed. Investors can avoid a lot of bad investments if they analyze a company's operating cash flow.
Net Income (Income Statement) and Cash from operations (Cash Flow Statement) should ideally be parallel. A consistently falling or negative operating Cash Flow(OCF) despite a rising net profit is a cause for concern because of aggressive accounting techniques or high working capital requirements. An ideal company has a higher operating cash flow than its net profit (income).
Stock Dilution & Debt - Housing Development Finance Corporation Ltd.
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Stock dilution occurs when a company issues additional shares. The above chart tells you if the company is
issuing additional shares thus decreasing your ownership. An ideal company should not even issue a single
additional share after an IPO.
Keep an eye on Housing Development Finance Corporation Ltd.'s total debt (short and long term), leases, debentures. All of these are
expenses which the company has to repay with interest. If you see a huge spike, you should know why.