# Sector/Industry

- **The Product**
- [ ] What is the sector primarily selling?
- [ ] How is the sector sub-classified based on product segments? *(for example, FMCG can be categorised into home care, personal care, food products, etc)*
- [ ] What is the market size for the product?
- [ ] Is the product prone to disruption from an alternate solution?
- **Brief History / Key Events**
- [ ] What are some key events that have had material impact on the industry?
- [ ] What are the domestic policies that affect the sector; what forthcoming policies are expected; how will they affect the sector?
- **Value Chain**
- [ ] What are the key raw materials & machinery/equipment required to build the product?
- [ ] Where does the sector largely source these raw materials & machinery/equipment from?
- [ ] What are some geographical advantages that preferred production destinations enjoy?
- [ ] What kind of labour force/workers are required for conducting the production process?
- [ ] What are steps involved in the core production process?
- [ ] What is the preferred strategies for marketing, distribution, delivery & installation of the product?
- [ ] How capital intensive is the production, marketing, distribution, delivery & installation of the product?
- **Market Overview**
- [ ] How mature is the sector domestically? Is the sector expecting a turnaround from the current trend?
- [ ] How is the market for the product split between organised & unorganised players? Which way is the market leaning now?
- [ ] How is the market for the product split between domestic & international players? Which way is the market leaning now?
- [ ] Who are the key players that set the trend for the sector? *(in terms of pricing power, product innovation, market practices)*
- [ ] Who are the emerging players that could have material impact on the trend for the sector?
- [ ] What entry to barrier does the sector enjoy?
- **Industry Benchmarks / Key metrics**
- [ ] Industry's preferred benchmark for capacity
- [ ] Industry's preferred benchmark for utilization
- [ ] Industry's preferred benchmark for consumption

# Business

- **Brief History/Key Events**
- [ ] When was the company founded?
- [ ] What are some key events that have had an impact on the core operations of the company?
- [ ] What are some key events that have had material impact on the stock price?
- **Value Proposition**
- [ ] What is the company primarily selling?
- [ ] What product segment is the company catering to?
- [ ] Where does the product fit in the market? Is there something that differentiates the product against competitors?
- [ ] What is the *addressable* market size for the product?
- [ ] What is the product's market share, mindshare, or position in the market?
- **Business Model**
- [ ] A brief overview of business model of the company.
- [ ] What are the growth avenues for the company?
- [ ] How does the company market its product?
- [ ] What is the capital allocation policy of the company?
- [ ] What is the earnings retention policy of the company?
- [ ] What is the dividend distribution & buyback policy of the company for earnings not retained?

# Financials & Ratios

- **Profit & Loss Statement**
- [ ] What does the revenue & profit breakup look like between different businesses of the company?
- [ ] What does the revenue & profit breakup look like in terms of the geographies the company sells to?
- [ ] What has been the revenue growth for the past 3, 5 & 10 years?
- [ ] What has been the EBIT (*earnings before financial costs & taxes)* growth for the past 3, 5 & 10 years?
- [ ] What has been the net earnings **growth for the past 3, 5 & 10 years?
- [ ] Is the revenue of the company overly concentrated within few clients?
- **Balanced Sheet Statement**
- [ ] Is the balance sheet clean/strong?
- [ ] How does equity dilution look like in the past few years for the company?
- [ ] How much cash, or equivalents does the company hold currently?
- [ ] What's been the major capital expenditures that the company has done in the past few years?
- [ ] How does regular capital expenditure look like for the company?
- [ ] What is the quantum of debt obligations for the company?
- [ ] Is there inventory building up for the company?
- [ ] Does the company face issues with collecting cash — Is there recievables building up for the company?
- **Cash Flow Statement**
- [ ] Are cash flows from operations comparable to net earnings?
- [ ] If CFO > Earnings, cash is not translating to earnings in the P&L statement
- [ ] If CFO < Earnings, there may be early revenue recognition without realising/collecting it
- [ ] How much cash is being left after tending to operational expenses and capex *(free cash flows)*
- [ ] Are there any anomolies/red flags in the cash flows of the company?
- **Profitability Ratios**
- [ ] What has been the trend for operating margins for the past few years?
- [ ] What has been the trend for net profit margins for the past few years?
- [ ] What has been the trend for return on capital *(roic/roce)* for the past few years?
- **Capital Ratios**
- [ ] Is the company over-leveraged? *(in terms of debt to equity etc)*
- [ ] What is the latest cost of equity, cost of debt, & thus weighted average cost of capital for the company?
- [ ] Is the company able to service its debt obligations? *(in terms of interest coverage ratio, quick ratio etc)*
- **Effeciency/Operational Ratios**
- [ ] How much time does it take for the company to convert its investments into cash? *(in terms of cash conversion cycle)*
- [ ] How much time does it take for the company to convert its inventory into sales? *(in terms of inventory days/inventory turnover)*
- **Industry Benchmarks**
- [ ] How does the company stack up against peers in terms of industry benchmarks *(like capacity utilisation, average revenue per user, revenue per room, gross merchandise value etc)*

# Management

- **Overview of promoters & management**
- [ ] Are the managers of the company competent enough to run it?
- [ ] Is the management style overly conservative or aggressive?
- [ ] Have the actions of the promoters or managers been in the interest of minority/retail shareholders?
- [ ] Have the promoters or managers been transparent & integrous in actions that impact the operations or valuations of the company?
- [ ] Is there a proper succession plan in place for key positions of the company?
- [ ] Is the management of the company being remunerated more than they should be?
- [ ] Do the promoters or managers of the company communicate well with the shareholders *(hold conference calls, conduct interviews, answer to investor relation emails, etc)?*
- **Shareholding Pattern**
- [ ] What has been the trend for promoter shareholding in the recent past?
- [ ] How does the distribution look between retail and instituitional shareholding?
- [ ] Is there enough free float? Are the shares of the company liquid?
- [ ] Is the quantum of shares pledged a concern?
- **Red Flags**
- [ ] Is there any pending litigation against the promoters or managers that can materially impact the stock?
- [ ] Is there any pending litigation against the company that can materially impact the stock?
- [ ] Are there too many/suspicious related party transactions taking place?
- [ ] Is the structure of the company too complex *(in terms of subsidiaries, holding companies etc)*?
- [ ] Are there any red flags in the auditor notes?

# Valuation

- **Multiples**
- [ ] What multiples have been used to evaluate the valuation of the company, if any?
- [ ] How do the multiples compare versus peers in the same sector?
- [ ] Is there a significant discount for risks that the multiples of the company suffer from? Why?
- [ ] Is there a significant premium for moats that the multiples of the company enjoy? Why? Does the moat show up in financial statements?
- [ ] Has there been a significant rerating of multiples for the company? Why?
- **Valuation Models**
- [ ] Have you used any valuation models *(such as* *Discounted Cash Flow or Discounted Dividend or Sum of parts)* to evaluate the company?
- [ ] If a valuation model has been used, what is the *approximate* *intrinsic value* of the stock as per the model? What discount does the stock price enjoy with intrinsic value in context?
- **Valuation Philosophy**
- [ ] Would you characterise buying of the stock as value investing, or growth investing?
- [ ] Is there adequate margin of safety in an investment in the stock? What constitutes it?

# Investment Thesis

- **Consideration of investment**
- [ ] What is your primary thesis for investing in the business?
- [ ] What is the expected duration for which the company is being bought?
- [ ] What are the quantitative factors that could invalidate this investment thesis?
- [ ] What are the risks or threats that could cause invalidations to this investment thesis?
- [ ] What would conclude your investment in the company if everything goes according to the thesis? What is the exit plan?
- [ ] Is your investment thesis in concensus with other participants of investing forums such as r/IndiaInvestments subreddit/discord or ValuePickr? Does this classify as a contrarian bet?
- [ ] Is your investment thesis based on a corporate action or a key event that would have material impact on the stock price? Does it therefore qualify as a workout investment?
- **Should this transaction be avoided?**
- [ ] Where does the primary thesis for this investment come from? Was it peddled on a news channel/social media post or did it come into your radar as a consequence of independent research?
- [ ] Is the investment being done due to *Fear of missing out* on positive price action momentum?
- [ ] Can the investment qualify as a case of *Catching a falling knife?*
- [ ] If you're exiting an investment because it has fallen significantly/sharply, is it because something has changed fundamentally about the business or its future earning potential?
- [ ] How does the stock fit into the overall portfolio? How much do you own of that sector/country already?
- **Staying on track**
- [ ] Does the latest Quarterly earnings report validate or invalidate your investment thesis?
- [ ] Does the latest Annual report provide you any material information that could validate or invalidate your investment thesis?
- [ ] Does the latest Investors call or management interview provide you any material information that could validate or invalidate your investment thesis?