28/06/2023
Stock for the day:
Metropolis Healthcare
This stock on 30th December 2021 Made a High of 3580. Since then it has fallen to a low of 1200 and currently trading at 1470.
This means from its high the stock fell 66% in a span of year. If you were invested during that period your 10 lakhs would have come down to 3.34 lakhs. Big loss! How to avoid picking such stocks we would talk later.
Lets concentrate on what is about to happen now.
Stock has increased form low of 1200 to 1470. almost 25 percent. Is this an investment opportunity? Lets explore.
Technical Charts
As shown by the Rectangular Pink Box, the stock has been trading in a tight range since around 6 months after the huge fall.
The Orange Circles indicate the big bars of volume (interest) in the stock at the low prices. Now no one would sell such large quantities at these low prices. Those who wanted to exit have already done so at higher prices indicates by the Blue Circles.
So we can with a very high probability conclude that this must be a buy side volume of big players.
Rule No. 1: Always follow smart money (big players) and you are more than likely to make money.
We can buy this stock and expect handsome returns in 10-12 months as an investor.
*Financial Analysis*
As we can see from the above two tables, there is a huge growth in Revenue starting from A .Y. 2020-21. This growth continued in 2021-22 as well. Now Metropolis Healthcare is a chain of diagnostic labs. So the growth in 20-21 and 21-22 can be accredited to *Covid*.
But the bright spot is the growth continued in 22-23 as well when Covid slowed down and became almost non-existent.
The net profit and np margin has constantly increased. The problem being that the net profit margin declined in the latest AY 22-23. But if you look closely this was due to Depreciation and Amortization expense and Employee Benefit expenses. The D&
A is a non cash expense meaning it has no bearing on how the company is run.
On the other hand the Gross Margins have remained upbeat and have increased from year to year with AY 22-23 being the best yet. This is a very big positive. The revenue is increasing but the operating costs are not increasing with same pace.
Increase in Revenue and Increase in Gross Margins is the best thing that can happen to a company paving the path for exponential growth in the coming years.
All of this is analysis, something can go wrong at any point of time. But currently all we can do is work with the information provided to us.
Disclaimer: I hold position in this stock.
26/06/2023