Rishi Sareen

Fundamentals Analysis of Company (Vijay Malik)

Feb 05, 2026

Site: https://www.drvijaymalik.com/detailed-fundamental-stock-analysis-guide/

Two investing approach discussed:

  • Growth Investing : An investor, who focus on find a company that is going to increase its earnings in future.
    • Her belief is that when a company increases its earnings, the demand for its stock will increase.
    • Increasing demand for the stock would lead to an increase in the price of the stock of the company.
    • The investor would gain from an increase in the stock price as well as dividends to be received from the company in future.
  • Value Investing : An investor who focus on finding the fair value of the company.
    • She would focus on the assets and earning potential of the companies.
    • She tries to find out the companies whose stocks are priced at a discount to the fair value.
    • The deeper the discount she can find, the better it is!

My approach, which is also followed by Dr Vijay Malik and also by Motilal Oswal SQGLP framework is a mixture of both : Find stocks which are on growth and available at a good margin of safety.

Benjamin Graham, who was father of modern security analysis was a proponent of Value investing. Buffet followed this approach in initial career. But then he moved to Growth stocks with margin of safety.

Four Parts covered in company analysis. I will not go in detail as it is covered by Dr Damodaran course. But main focus:

  1. Financial Analysis
    1. Profit and Loss Statement (P/L): He focuses on companies which earn a lot of money (topline), use minimum amount to earn that money, pay the due amount of taxes on its profits and increase the sales (topline) & earnings (bottom line) year on year.
    2. Balance Sheet : He focus on companies, which use a minimum amount of debt and create assets that keep on generating revenue for the company year after year without the need for frequent expenses to maintain these assets.
    3. Cash Flow Statement: Focus on companies, which generate a good amount of cash flow from operations that can take care of their requirements of investment (CFI) and repayment of debt (CFF). If a company generates so much cash that after taking care of CFI and CFF, it still has surplus left, it is a dream company and I buy as many stocks as I can (Shop till you drop!!).
  2. Business Analysis
    • Focus on a company, which has shown good growth in sales & profits in past years and has moat.
    • Dr Vijay Malik proxy way to identify the moat
      • Therefore, I use consistent growth in sales in past as a substitute for market research and try to analyse it further. If I find a company has been growing at a rate of 20% year on year for the past 10 years whereas its peers are growing only at 10% or less, I analyse it further. If 10 year back it had a single manufacturing plant and it has increased its capacity to 5-6 plants now where it is able to sell the entire production of these 5-6 plants, then the company is bound to have a sustainable advantage “Moat”.
  3. Management Analysis
    • We should read the profile of promoters, search about their credentials, any issues, penalties, regulatory actions etc. about them from public sources (e.g. Google). We should do similar checks about independent directors as well. Once we are convinced that there is nothing to question their character & integrity then we should move ahead with further analysis.
      • A comparative analysis of salary drawn by promoters and the profits of a company is a good parameter. The promoter should not have a history of seeking an increase in remuneration when the profits of the company declined in past.
  4. Valuation Analysis
    1. P/E : Lower the better, ofcourse
    2. Price to Book Ratio :
      1. It is useful mainly for financial companies where most of the assets are cash assets and book value is a good indicator of worth of the company
      2. For other cases, I find P/B ratio irrelevant due to usage of the historical cost of the company’s assets while calculating book value (I’ve same view, and prof Damodaran also highlights this challenge)
    3. Market Cap : Micro Cap or Small cap as they have more growth potential