Performance of select quality parameters:
At NJ AMC, an exhaustive examination of various quality parameters has been undertaken, revealing several robust metrics indicative of a company's financial robustness. Some of these metrics are Return on Equity (ROE), ROE Consistency, Dividend Payout Ratio, Debt-to-Equity, and Current Ratio Consistency. We would like to share an analysis of the comparative performance between high-quality and low-quality stocks as measured by these metrics. The findings demonstrate that high quality stocks have consistently outperformed their lower-quality counterparts and market indices over extended periods.
Presented below is the cumulative growth of INR 1000 from September 2006 to November 2023 for both the top 100 high-quality and bottom 100 low-quality stocks, alongside the Nifty 500 Index. The accompanying table displays the Compound Annual Growth Rate (CAGR) and annualised volatility. It is noteworthy to emphasise the superior risk-adjusted returns attained by high-quality stocks, assessed through diverse quality parameters, in contrast to low-quality stocks and the market index throughout this specified timeframe.
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Sept 2006 to Nov 2023
|
CAGR (%)
|
Annualised Volatility (%)
|
Maximum Drawdown (%)
|
Cumulative Growth of INR 1000
|
|
ROE Top 100
|
15.26
|
15.79
|
-63.94
|
₹11,482.26
|
|
ROE Bottom 100
|
9.51
|
22.58
|
-76.55
|
₹4,760.20
|
|
Nifty 500 TRI
|
12.31
|
18.42
|
-63.71
|
₹7,338.83
|
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Source: Internal research, Bloomberg, CMIE, National Stock Exchange of India
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Calculations are for the period 30th September 2006 to 30th November 2023.
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Past performance may or may not be sustained in future and is not indication of future return.
|
Data from Sept 2006 to Nov 2023
|
CAGR (%)
|
Annualised Volatility (%)
|
Maximum Drawdown (%)
|
Cumulative Growth of INR 1000
|
|
ROE Consistency Top 100
|
16.54
|
16.01
|
-57.9
|
₹13,857.13
|
|
ROE Consistency Bottom 100
|
8.08
|
22.49
|
-77.08
|
₹3,803.75
|
|
Nifty 500 TRI
|
12.31
|
18.42
|
-63.71
|
₹7,338.83
|
-
Source: Internal research, Bloomberg, CMIE, National Stock Exchange of India
-
Calculations are for the period 30th September 2006 to 30th November 2023.
-
Past performance may or may not be sustained in future and is not indication of future return.
|
|
CAGR (%)
|
Annualised Volatility (%)
|
Maximum Drawdown (%)
|
Cumulative Growth of INR 1000
|
|
Dividend Payout Top 100
|
17.03
|
15.32
|
-60.31
|
₹14,901.01
|
|
Dividend Payout Bottom 100
|
6.52
|
22.42
|
-78.38
|
₹2,957.77
|
|
Nifty 500 TRI
|
12.31
|
18.42
|
-63.71
|
₹7,338.83
|
-
Source: Internal research, Bloomberg, CMIE, National Stock Exchange of India
-
Calculations are for the period 30th September 2006 to 30th November 2023.
-
Past performance may or may not be sustained in future and is not indication of future return.
| |
CAGR (%)
|
Annualised Volatility (%)
|
Maximum Drawdown (%)
|
Cumulative Growth of INR 1000
|
|
Low Debt to Equity 100
|
17.02
|
15.12
|
-60.49
|
₹14,891.04
|
|
High Debt to Equity 100
|
10.89
|
22.58
|
-74.1
|
₹5,910.30
|
|
Nifty 500 TRI
|
12.31
|
18.42
|
-63.71
|
₹7,338.83
|
-
Source: Internal research, Bloomberg, CMIE, National Stock Exchange of India
-
Calculations are for the period 30th September 2006 to 30th November 2023.
-
Past performance may or may not be sustained in future and is not indication of future return.
|
From Sep, 2006 to Oct 2023
|
CAGR (%)
|
Annualised Volatility (%)
|
Maximum Drawdown (%)
|
Cumulative Growth of INR 1000
|
|
Current Ratio Consistency Top 100
|
17.81
|
17.45
|
-67.76
|
₹16,708.39
|
|
Current Ratio Consistency Bottom 100
|
8.67
|
23.42
|
-79.63
|
₹4,165.52
|
|
Nifty 500 TRI
|
12.31
|
18.42
|
-63.71
|
₹7,338.83
|
* Current Ratio Consistency only for Non-Financial firms
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Source: Internal research, Bloomberg, CMIE, National Stock Exchange of India
-
Calculations are for the period 30th September 2006 to 30th November 2023.
-
Past performance may or may not be sustained in future and is not indication of future return.
