Is this stock a bargain, or a business that's actually breaking? Find out in 2 minutes.
1Was the fall sector-wide / market-wide, or specific to this company?
Search "[stock name] share price fall reason" on Google, and check how the rest of the sector performed that week. If the whole sector or Nifty fell too, it's likely market-wide. If only this stock fell while peers were stable, it's company-specific.
Example: search "Paytm share price fall reason" or check if the whole fintech sector fell that week.
2Can the company comfortably service its debt?
Search "[company name] debt to equity ratio" and "interest coverage ratio" on Google. Debt to equity below 1 is generally comfortable. Interest coverage ratio above 3 means the company earns enough to comfortably pay interest on its debt.
Example: search "Vodafone Idea debt to equity ratio" to see how stretched a company's debt really is.
3What's the sales and profit trend over the last 2-3 years, before this crash?
Search "[company name] quarterly results" or "[company name] financials Screener.in" on Google. Look at revenue and net profit over the last 3 years, not just the last quarter. Steadily rising numbers is healthy. Falling numbers for multiple years before the crash is a warning sign.
Example: search "Yes Bank quarterly results last 3 years" to see if profit was rising or falling before the crash.
4What have promoters been doing with their own shares?
Search "[company name] shareholding pattern promoter holding" on Google. Check if promoter holding has been rising, falling, or if any shares are pledged. Rising or stable holding with no pledging is a good sign. Falling holding or high pledging is a warning sign.
Example: search "Zee Entertainment promoter holding pledge" to check if promoters were selling or pledging shares.
5Is the company generating real cash from its core operations?
Search "[company name] cash flow from operations" on Google. Check if this number has been positive in recent years. Positive and growing cash from operations means the core business is healthy. Negative or shrinking cash flow, even with reported profit, is a warning sign.
Example: search "IL&FS cash flow from operations" to see whether a company was actually generating cash or just reporting profit on paper.