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Financial Accounting Term Paper

Objective:

Analysing position of Motherson Sumi as compared to its other four competitors


based on its performance for the past 5 years

Team:

Akshay Garg 4KA


Anson Antony 8KA
Arjun S 9KA
Ashok George 11KA
A brief Description about companies:

Motherson Sumi Systems:

Samvardhana Motherson Group (SMG) combines the power of innovation and product
quality to passionately create world class products that cater to customer needs across
diverse industries, especially automotive. Founded in 1975, the Group has a diversified
industry-leading portfolio of auto ancillary products and services that make it a full system
solutions provider for its customers across the globe. With market leading products ranging
from Electrical Distribution Systems, automotive rearview mirrors and polymer processing
to lighting systems, air intake manifolds, and HVAC systems.

Exide Industries Limited:

For more than six decades, Exide has been one of Indias most reliable brands, enjoying
unrivalled reputation and recall. Their constant emphasis on innovation, extensive
geographic footprint, strong relationship with marquee clients and steady technology
upgradations with global business partners have made them a distinct frontrunner in the
lead-acid storage batteries space for both automotive and industrial applications.

Bharat Forge:

Bharat Forge Limited (BFL), the Pune based Indian multinational is a technology driven
global leader in metal forming having transcontinental presence across nine manufacturing
locations, serving several sectors including automotive, power, oil and gas, construction &
mining , rail, marine and aerospace. Bharat Forge uses its strong platform of metallurgical
knowledge, design & engineering capability and manufacturing prowess, to create a strong
position for itself in these sectors.

Bosch India:

In India, Bosch is a leading supplier of technology and services in the areas of Mobility
Solutions, Industrial Technology, Consumer Goods, and Energy and Building Technology.
Additionally, Bosch has in India the largest development centre outside Germany, for end to
end engineering and technology solutions. In India, Bosch Limited is the flagship company of
the Bosch Group. It earned revenue of over .9570 crores in 2014.

WABCO vehicle Control Systems:

WABCO Vehicle Control Systems is an American provider of electronic braking, stability,


suspension and transmission automation systems for heavy duty commercial vehicles.
It was founded in the U.S. in 1869 as Westinghouse Air Brake Company. WABCO was
acquired by American Standard in 1968 and spun off in 2007. Headquartered in Brussels,
Belgium, WABCO employs more than 11000 people in 34 countries worldwide. In 2013,
WABCOs total sales were $2,720.5 million, a rise of 10% over the previous year.
Analysis

Current Ratio:

The current ratio is a popular financial ratio used to test a company's liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities.

Current Ratio = Current Assets/Current Liabilities

Companies 2016 2015 2014 2013 2012


Motherson 1.28 1.09 1.04 1.06 0.98
Sumi
Bosch 2.12 2.32 2.71 2.95 2.65
Bharat Forge 1.53 1.80 1.37 1.22 1.25
Wabco 2.53 3.46 3.78 4.11 3.28
Exide 0.60 0.12 0.34 0.18 0.72
Industries

4.5

3.5

3 Motherson Sumi
2.5 Bosch

2 Bharat Forge

1.5 Wabco
Exide Industries
1

0.5

0
2012 2013 2014 2015 2016

Throughout five years, Wabco has the highest current ratio which reflects its liquidity
position. It is in a better position to pay its obligations in terms of crisis as compared to its
other four competitiors. However, the trend shows that its capacity to meet its obligations
increased till 2013 but after it, it has been in a decline since.

Also, except Wabco and Bosch, Other companies have more or less the same current ratio.
Quick Ratio:

The quick ratio - aka the quick assets ratio or the acid-test ratio - is a liquidity indicator that
further refines the current ratio by measuring the amount of the most liquid current assets
there are to cover current liabilities.

Quick ratio = cash & equivalents + short-term investments + account receivable/current


liabilities

Companies 2016 2015 2014 2013 2012


Motherson 0.67 0.61 0.60 0.63 0.61
Sumi
Bosch 1.69 1.82 2.16 2.37 2.05
Bharat Forge 1.12 1.38 1.02 0.84 0.82
Wabco 2.13 2.91 3.08 2.96 2.37
Exide 1.12 0.67 0.97 0.81 1.34
Industries

3.5

2.5
Motherson Sumi
2 Bosch
Bharat Forge
1.5
Wabco
1 Exide Industries

0.5

0
2012 2013 2014 2015 2016

Quick ratio is a better estimate of liquidity since it eliminates inventory from current assets
as inventory is not easily converted into cash.

Wabco is at the top and can easily liquidate its assets. However, there is a decline in its ratio
after 2014. Bosch shows a continuous decline after 2013 but is in a better financial position
that Bharat Forge, Exide industries and Motherson Sumi.
Cash Ratio:

The cash ratio is an indicator of a company's liquidity that further refines both the current
ratio and the quick ratio by measuring the amount of cash, cash equivalents or invested
funds there are in current assets to cover current liabilities.

Cash ratio = cash & cash equivalents + Invested Funds/current liabilities

Companies 2016 2015 2014 2013 2012


Motherson 0.016 0.114 0.0147 0.05 0.016
Sumi
Bosch 0.66 0.74 0.65 0.78 0.48
Bharat Forge 0.41 0.46 0.4 0.32 0.36
Wabco 0.48 1.03 0.97 0.84 0.65
Exide 0.048 0.025 0.1 0.075 0.064
Industries

1.2

0.8 Motherson Sumi


Bosch
0.6
Bharat Forge

0.4 Wabco
Exide Industries
0.2

0
2012 2013 2014 2015 2016

It is a more refined estimate of Liquidity since it takes only cash & cash equivalents along
with invested funds into account which are highly liquid.

Wabco is a pioneer in this ratio as well but only till 2015. Bosch overtakes it in the terms of
liquidity in 2016. Also, Motherson Sumi and Exide industries are close competitors and are
revolving around each other

Also, Wabcos decline in cash ratio can be attributed to the fact that there is a decrease in
cash and invested funds at Wabco due to which it is more vulnerable in times of crisis.
Net Profit Margin (%):

Net profit margin = Net income/Net sales

Companies 2016 2015 2014 2013 2012


Motherson 12.9 10.1 11.55 10.68 8.65
Sumi
Bosch 10.71 10.57 9.64 10.61 13.23
Bharat Forge 15.9 15.4 11.38 9.4 9.6
Wabco 10.9 8.8 10.3 13.36 14.5
Exide 10.6 9.16 9.53 12.34 12.72
Industries

18

16

14

12 Motherson Sumi
10 Bosch

8 Bharat Forge

6 Wabco
Exide Industries
4

0
2012 2013 2014 2015 2016

In terms of profit margin, there is a close competition among the five competitors. With
Wabco leading till mid-2013, Bharat forge comes out as the winner in the end.

In 2015, Wabco showed a positive trend due to its new long term supply agreements with a
new customer based in China. Motherson Sumi also showed a growth trend due to its
takeover of Stoneridge Wiring Division in 2014.

Decline in NPM of Wabco can be related to the fact that its cash ratio has also decreased
since its net assets has decreased and its liquidity has declined. It resulted in the
deterioration of the companys financial position in the market.
Return on Assets (%):

This ratio indicates how profitable a company is relative to its total assets.

ROA = Net Income/ Average Total Assets

Companies 2016 2015 2014 2013 2012


Motherson 18.58 13.77 14.6 13.65 10.48
Sumi
Bosch 11.32 12.82 9.92 12.13 15.74
Bharat Forge 8.16 9.12 5.34 4.14 9.9
Wabco 13.4 10.8 12.4 16.5 22.6
Exide 11.69 11.41 11.02 11.87 11.35
Industries

25

20

Motherson Sumi
15
Bosch
Bharat Forge
10
Wabco
Exide Industries
5

0
2012 2013 2014 2015 2016

Wabco is showing a constant decline till 2015. Again, it is due to a reduction in its liquidity
and a decline in net assets resulting in the loss of ROA. In 2015, it picked up a strong growth
due to Wabco being entering into long term supply agreements with a new customer based
in China.

Motherson Sumi is showing a positive trend. It is the result of its takeover of Peguform in
2011 and Stoneridge Wiring Division in 2014. Also, investors are showing an increased
confidence in the company.
Return on Equity

It is an indicator of how profitable the company is, it does this by comparing its net income to
average shareholders equity. It gives an idea about the amount of money a shareholder has earned
for his investment. The better the management is at utilizing its equity base, the more the
shareholders would benefit.

Return on Equity(ROE) = Net Income/Average Shareholders equity

2016 2015 2014 2013 2012


Exide 16.16% 15.20% 14.64% 15.77% 15.20%
Bosch 13.95% 18.21% 14.06% 17.19% 23.74%
Wabco 6.63% 15.99% 20.52% 21.99% 17.94%
Bharat Forge 19.97% 23.47% 16.19% 13.76% 33.16%
Motherson Sumi 29.22% 24.49% 24.49% 28.08% 28.08%

Return On Equity
35.00%

30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
2016 2015 2014 2013 2012

Exide Bosch Wabco Bharat Forge Motherson Sumi

Motherson Sumi has been continuously giving the highest returns on capital employed over the last
three years (2013-2016), which is very indicative of the firms profitability. Wabco however has been
not performing well when it comes to return on capital employed and has been on a downward
slope since 2013.

Bharat forge which had higher values for ROE has a less value for ROCE which is because of his
relatively small equity base as compared to its debt base. Therefore, this is the reason why ROCE is
used to gauge the profitability of a company as compared to ROE.
Return On Capital Employed

It expresses the net income as a percentage of the capital employed. It complements the return on
equity ratio by adding a companys debt liabilities along with the shareholders equity and hence
gives a more comprehensive understanding of the overall performance of the company.

Return On Capital Employed(ROCE) Net Income/ Capital Employed

2016 2015 2014 2013 2012


Exide 15.58% 14.63% 14.14% 15.22% 14.53%
Bosch 15.51% 24.82% 18.72% 22.41% 30.48%
Wabco 6.63% 15.99% 20.52% 21.99% 17.94%
Bharat Forge 11.33% 12.39% 7.36% 5.99% 14.38%
Motherson Sumi 34.99% 30.09% 31.82% 28.69% 23.06%

Return On Capital Employed


40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2016 2015 2014 2013 2012

Exide Bosch Wabco Bharat Forge Motherson Sumi

Motherson Sumi has been continuously giving the highest returns on capital employed over the last
three years (2013-2016), which is very indicative of the firms profitability. Wabco however has been
not performing well when it comes to return on capital employed and has been on a downward
slope since 2013.

Bharat forge which had higher values for ROE has a less value for ROCE which is because of his
relatively small equity base as compared to its debt base. Therefore, this is the reason why ROCE is
used to gauge the profitability of a company as compared to ROE.
Debt Ratio

It compares a companys total liabilities and assets, and gives an idea about the amount of leverage
that is being used by the company.

Debt Ratio = Total Liabilities/Total Assets

2016 2015 2014 2013 2012


Exide 15.58% 14.63% 14.14% 15.22% 14.53%
Bosch 31.40% 29.56% 29.45% 29.47% 33.69%
Wabco 6.63% 15.99% 20.52% 21.99% 17.94%
Bharat Forge 60.05% 58.18% 64.16% 67.46% 67.47%
Motherson Sumi 36.42% 43.78% 43.78% 48.00% 48.00%

Debt Ratio
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2016 2015 2014 2013 2012

Exide Bosch Wabco Bharat Forge Motherson Sumi

From the above graph it is evident that Bharat Forge had the highest debt ratio percentages (60%
and above) over the past 4 years and hence a less strong equity position as compared to the other
three companies. The higher ratio is also indicative of the higher risk the company is willing to take.
However, if the company manages to generate returns above its cost of capital then the investor
confidence would be regained.

Motherson Sumi has maintained a debt ratio percentage between 40% and 50% which, though on
the higher side from a pure risk assessment point of view, it can still manage to seek future debts,
which is not the case with Bharat Forge

Exide and Wabco has been doing well by maintaining low levels of debt ratio percentages over the
past couple of year
Debt Equity Ratio

It is a measure of how much suppliers, lenders, creditors, and obligators have committed to the
company as compared to what the shareholders have invested. A lower value indicates that the
company has a good equity position and is using less leverage.

Debt to equity ratios is generally used for comparing only those companies in the same industry.

Debt-Equity Ratio = Total Liabilities/Shareholders Equity

2016 2015 2014 2013 2012


Exide 27.65% 24.95% 24.72% 24.73% 25.33%
Bosch 38.67% 41.97% 41.73% 41.79% 50.81%
Wabco 44.60% 29.02% 25.50% 22.25% 28.11%
Bharat Forge 41.01% 40.30% 40.42% 48.29% 48.96%
Motherson Sumi 14.00% 20.00% 33.00% 52.00% 68.00%

Debt-Equity Ratio
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2016 2015 2014 2013 2012

Exide Bosch Wabco Bharat Forge Motherson Sumi

Motherson Sumi has successfully managed to create a strong equity and a less leverage position
over the last 5 years. This is evident from the decreasing value of the debt-equity ratio over a period
of the last 5 years.

Bharat Forge and Bosch are more reliant on debt rather than equity which is evident from the
consistently high value of the ratio.

Exide on the other hand has consistently maintained a position at 20% - 30% as debt- equity ratio.
Capitalization Ratio

It measures the debt component of a companys capital structure, or capitalization. This ratio is
more sensible since it gives an idea about the companys use of leverage as a part of the overall
debt.

Capitalization Ratio = Long-Term Debt/(Long-Term Debt + Shareholders Equity)

2016 2015 2014 2013 2012


Exide 3.57% 3.77% 3.40% 3.53% 4.40%
Bosch 5.17% 6.76% 6.25% 7.21% 8.44%
Wabco 2.70% 3.85% 4.16% 3.86% 4.10%
Bharat Forge 41.01% 40.30% 40.42% 48.29% 48.96%
Motherson Sumi 9.13% 14.59% 14.59% 19.53% 19.53%

Capitalization Ratio
60.00%

50.00%

40.00%

30.00%

20.00%

10.00%

0.00%
2016 2015 2014 2013 2012

Exide Bosch Wabco Bharat Forge Motherson Sumi

Bharat Forge over the past 5 years has been using a lot of leverage as part of its capital structure.
Since, there is a high level of debt and low level of equity, it indicates that the investment quality of
the firm isnt very attractive.

Motherson Sumi has managed to maintain its capitalization ratio between 10% to 20% which is
reasonably good.

Exide and Wabco has maintained less capital ratios as compared to their counterparts which
indicates they are financially fit as compared to the other players in the industry.
Operating Cash Flow

Operating Cash Flow is the amount of cash generated by a companys business operations. It
indicates the ability of a company to generate a positive cash flow to maintain and grow its
operations.

Operating cash flow/Sales Ratio

2016 2015 2014 2013 2012

Wabco 0.124 0.085 0.120 0.085 0.137

Bosch 0.123 0.110 0.115 0.096 0.052

Exide 0.141 0.034 0.078 0.057 0.096

Bharat Forge 0.238 0.195 0.217 0.131 0.186

Motherson Sumi 0.120 0.162 0.162 0.144 0.144

Operating Cash Flow


0.250

0.200

0.150

0.100

0.050

0.000
2016 2015 2014 2013 2012

Wabco Bosch Exide Bharat Forge Motherson Sumi

Motherson Sumi which has been showing consistent performance in operating cash flow ratio
experienced a drop in 2016 most likely due to the impact of Volkswagen Scandal. Bharat Forge after
a drop in its operating cash flow ratio in 2013, has performed consistently after that.
Interest Coverage

Interest ratio tells us how easily a company can pay back its debt through its profit.

Interest Coverage

2016 2015 2014 2013 2012

Wabco 1807.73 490.64 1150.50 9247.50 1801.92

Bosch 442.643 136.776 433.310 244.764 3935.000

Exide 612.267 273.128 104.378 86.776 45.442

Bharat Forge 4.631 5.631 3.067 1.148 2.287

Motherson Sumi 42.590 23.888 23.888 18.187 18.187

Interest Coverage
10000.00

8000.00

6000.00

4000.00

2000.00

0.00
2016 2015 2014 2013 2012

Wabco Bosch Exide Bharat Forge Motherson Sumi

Motherson Sumis Interest coverage ratio has consistently improved over the years. Its interest
coverage ratio is low because of its debt fuelled acquisitions it has made in the past and these
acquisitions are bound to contribute to the profitability of the company in the future which might
increase this ratio. Wabcos has a very high interest coverage ratio but has taken a dive in 2016.
Fixed Asset Turnover

This ratio is a rough measure of the productivity of a company's fixed assets (property, plant and
equipment or PP&E) with respect to generating sales.

Fixed Asset turnover

2016 2015 2014 2013 2012

Wabco 4.572 3.733 3.313 3.190 4.014

Bosch 2.147 3.271 3.857 4.951 6.239

Exide 6.543 8.010 7.921 6.044 5.355

Bharat Forge 1.084 1.352 1.129 0.916 1.187

Motherson Sumi 3.745 3.377 3.377 3.117 3.117

Fixed Asset Turnover


9.000
8.000
7.000
6.000
5.000
4.000
3.000
2.000
1.000
0.000
2016 2015 2014 2013 2012

Wabco Bosch Exide Bharat Forge Motherson Sumi

Motherson Sumi performance has been consistent for the entire sample period as whereas Boschs
ratio has declined owing to lack of demand for automobiles globally.
Dividend Payout Ratio

The dividend payout ratio is the amount of dividends paid to stockholders relative to the amount of
total net income of a company. The amount that is not paid out in dividends to stockholders is held
by the company for growth. The amount that is kept by the company is called retained earnings.

Dividend Payout Ratio

2015 2014 2013 2012 2011.000

Wabco 0.042 0.054 0.059 0.051 0.044

Bosch 0.672 0.627 0.612 0.618 1.184

Exide 0.327 0.343 0.314 0.260 0.276

Bharat Forge 0.018 0.137 0.111 0.183 0.141

Motherson Sumi 0.465 0.513 0.412 0.250 0.280

Dividend Payout Ratio


1.400

1.200

1.000

0.800

0.600

0.400

0.200

0.000
2015 2014 2013 2012 2011.000

Wabco Bosch Exide Bharat Forge Motherson Sumi

Bosch has the highest dividend payout ratio when compared to others whereas Motherson Sumis
has channelled its dividend to retained earnings in order to fuel its growth.
Price/Book Value Ratio

A valuation ratio used by investors which compares a stock's per-share price (market value) to its
book value

Price/Book Value Ratio

2016 2015 2014 2013 2012

WABCO 11.242 12.549 5.106 4.067 5.485

Bosch 7.873 10.864 5.022 5.069 3.643

Exide 2.671 3.725 2.755 3.214 4.148

Bharat Forge 5.413 6.280 2.780 2.709 2.770

Motherson Sumi 14.550 21.640 11.900 7.030 5.660

Price to Book Value


25.000

20.000

15.000

10.000

5.000

0.000
2015 2014 2013 2012 2011

WABCO Bosch Exide Bharat Forge Motherson Sumi

Owing to Volkswagen Scandal the share price of Motherson Sumi had taken a beating in the recent
times due to which its P/BV ratio has gone down drastically. Motherson Sumi is traded at a value
much higher than its intrinsic value mostly because the investors are hoping that the company
would show a great growth in the coming years.
Enterprise Value Multiple

This valuation metric is calculated by dividing a company's "enterprise value" by its earnings before
interest expense, taxes, depreciation and amortization (EBITDA). Overall, this measurement allows
investors to assess a company on the same basis as that of an acquirer. As a rough calculation,
enterprise value multiple serves as a proxy for how long it would take for an acquisition to earn
enough to pay off its costs (assuming no change in EBITDA).

Enterprise Value Multiple


Company/Year 2016 2015 2014 2013 2012
Motherson Sumi 30.49 47.38 24.31 14.29 13.19

Bharat Forge 37.35 33.71 22.92 49.05 25.04


Bosch 35.84 40.83 26.10 25.83 23.27
WABCO 35.54 47.25 19.05 11.89 12.28
Exide 11.15 16.06 11.96 12.68 16.77

60 X Axis
Enterprise Value Multiple
50
1-2016

2-2015
40
3-2014
30
4-2013
20
5-2012
10

0
1 2 3 4 5

Motherson Sumi Bharat Forge Bosch WABCO Exide

We see that the EVM for Motherson Sumi has been increasing till 2015, but then we see a sudden
drop. This trend is seen most other firms like Exide and Bosch. Obviously, a company's stock price is
heavily influenced by investor sentiment and market conditions, which, in turn, will be determined
by a company's market-cap value. The severe drop in oil prices as well as the reduction of Chinese
exports in 2015 point towards lesser Enterprise value. This led to greater EBITDA. Hence the shares
prices improved till 2015 and dropped
Dividend Yield

A stock's dividend yield is expressed as an annual percentage and is calculated as the company's
annual cash dividend per share divided by the current price of the stock. This quarterly dollar
amount is annualized and compared to the current stock price to generate the per annum dividend
yield, which represents an expected return.

Dividend yield
Company/Year 2016 2015 2014 2013 2012
Motherson Sumi 0.0073 0.0078 0.0114 0.0110 0.0117
Bharat Forge 0.0006 0.0048 0.0078 0.0091 0.0096
Bosch 0.0128 0.0105 0.0172 0.0172 0.0198
WABCO 0.0010 0.0009 0.0025 0.0036 0.0033
Exide 0.0164 0.0144 0.0155 0.0126 0.0118

Dividend yield X Axis

0.0250 1-2016

0.0200 2-2015

0.0150 3-2014

4-2013
0.0100

5-2012
0.0050

0.0000
1 2 3 4 5

Motherson Sumi Bharat Forge Bosch WABCO Exide

A stock's dividend yield depends on the nature of a company's business, its posture in the
marketplace (value or growth oriented), its earnings and cash flow, and its dividend policy. We see
that Motherson Sumi has been following a stable dividend policy. It has marginally decreased. This
can be owed to the decreased savings due to heavy investment and bad debt repayment. Overall the
economy for industries has been doing very poor since 2013. But Motherson Sumi has performed
exceptionally well and has been an oft stable stock.
Price/Sales Ratio

A stock's price/sales ratio (P/S ratio) is another stock valuation indicator similar to the P/E ratio. The
P/S ratio measures the price of a company's stock against its annual sales, instead of earnings. P/S
reflects how many times investors are paying for every dollar of a company's sales. Since earnings
are subject, to one degree or another, to accounting estimates and management manipulation,
many investors consider a company's sales (revenue) figure a more reliable ratio component in
calculating a stock's price multiple than the earnings figure.

Price to sales ratio


Company/Yield 2016 2015 2014 2013 2012
Motherson Sumi 7.564 9.330 5.328 4.812 5.117
Bharat Forge 4.496 4.756 2.194 1.940 1.641
Bosch 6.046 6.309 3.446 3.446 3.310
WABCO 3.135 3.934 1.705 1.316 1.348
Exide 1.653 2.451 1.882 2.038 2.729

Price to sales ratio X Axis

10.000 1-2016
9.000
8.000 2-2015
7.000
6.000 3-2014
5.000
4.000 4-2013
3.000
2.000 5-2012
1.000
0.000
1 2 3 4 5

Motherson Sumi Bharat Forge Bosch WABCO Exide

It is very obvious the trend of increasing price to sales ratio is being followed everywhere. The
industry is moving to a trend of increasing price. This means a good time for investors. We see a
sudden jump after 2014. The decreasing oil prices reduced the COGS for firms like Motherson Sumi
which was an impetus to the Indian industry as a whole.
Price/Earnings Ratio

The price/earnings ratio (P/E) is the best known of the investment valuation indicators. The P/E ratio
has its imperfections, but it is nevertheless the most widely reported and used valuation by
investment professionals and the investing public. The financial reporting of both companies and
investment research services use a basic earnings per share (EPS) figure divided into the current
stock price to calculate the P/E multiple (i.e. how many times a stock is trading (its price) per each
dollar of EPS).

Price to earnings ratio


Company/Yield 2016 2015 2014 2013 2012
Motherson Sumi 35.82 31.03 36.22 48.19 41.53
Bharat Forge 29.78 28.36 14.20 20.06 14.65
Bosch 52.35 59.67 35.70 35.70 31.20
WABCO 30.53 47.32 17.31 10.64 9.97
Exide 16.59 24.58 18.87 20.04 28.42

Price to earnings ratio X Axis

70.00 1-2016
60.00
2-2015
50.00
40.00 3-2014
30.00
4-2013
20.00
10.00 5-2012
0.00
1 2 3 4 5

Motherson Sumi Bharat Forge Bosch WABCO Exide

We see a varied trend here. But we can say that most companies are experiencing an era of
increasing earnings per share. Especially Motherson Sumi, which has been enjoying good share
prices for the past 5 years. This bodes well with the investors and helps to raise capital for further
investment. A stock with a high P/E ratio suggests that investors are expecting higher earnings
growth in the future compared to the overall market, as investors are paying more for today's
earnings in anticipation of future earnings growth. Hence, as a generalization, stocks with this
characteristic are considered to be growth stocks. You may look at it positively as a value investor or
negatively as a growth investor.
Price/Cash Flow Ratio

The price/cash flow ratio is used by investors to evaluate the investment attractiveness, from a value
standpoint, of a company's stock. This metric compares the stock's market price to the amount of
cash flow the company generates on a per-share basis.

price to cash flow ratio


Company/Yield 2016 2015 2014 2013 2012
Motherson Sumi 38.57 29.21 35.44 76.10 66.48
Bharat Forge 18.50 23.96 9.79 14.44 8.68
Bosch 49.22 57.25 29.84 29.84 34.30
WABCO 47.89 86.96 26.86 29.14 18.61
Exide 8.84 46.30 15.89 30.59 24.86

price to cash flow ratio X Axis

100.00 1-2016
80.00 2-2015
60.00
3-2014
40.00
4-2013
20.00
5-2012
0.00
1 2 3 4 5

Motherson Sumi Bharat Forge Bosch WABCO Exide

Investors need to remind themselves that there are a number of non-cash charges in the income
statement that lower reported earnings. Recognizing the primacy of cash flow over earnings leads
some analysts to prefer using the P/CF ratio rather than, or in addition to, the company's P/E ratio.
Despite these considerations, there's no question that the P/E measurement is the most widely used
and recognized valuation ratio.

Here we see that Motherson Sumi has faced a steep decline after a relatively stable period from
2012 to 2013. 2013 has been a tumultuous year for the manufacturing industry as a whole. While
competitors like Bosch and WABCO improved since that day, most other industries have seen a
steep fall in operating cash flow. Declining sales or margin compression have negative impacts on
profitability. Sales can be negatively impacted by changing economic conditions, loss of pricing
power, and timing within a product's life cycle or poor operational execution. These shifts can be
attributed to declining aggregate demand in the economy may be some other reasons for the trend.