What is the history of the company and management?
Before starting the analysis, you have to look at the company’s background and management. You need to know what is the business of the company in terms of its infrastructure, the number of factories, branches, retail outlets, etc.
Understand the culture of the organization. For example, everyone knows that the Tata group has a certain culture. Irrespective of any Tata company, the group brings a certain culture, whether it is a commitment towards employees, society contribution, etc. These aspects indicate the long-term commitment of the company. You need to understand how long the company has been in business. It is a good idea to look at companies that have been in operation for 15-20 years, this ensures that the company has seen at least two business cycles. Oftentimes in the Indian context, we may have third-generation or fourth-generation running the business, and it’s even better. The promoters may be involved in the day-to-day operations or have professionals run the business. You have to ensure that promoter has skin in the game and has a majority of his/her wealth tied to the prosperity of the business. It may be a good idea to look at the financials of the company over the long term. It is a good idea to look at 5-10 years of the financial history of the company. You can look at two data points to start, the first information you can look at is the return profile of the company. Then you can look at the sales growth numbers of the company. Once you are satisfied with the return and growth, you can look at cash flows to ensure the money is coming to the business and not tied to the working capital. A quick search on broker reports, TV interviews, and google searches will provide insights on the management, business outlook, any fraud company committed in the past, resignations, etc.