My learning 1, look beyond technical indicators. 2, each sector has a key ratio 3, find the sector going through operating deleveraging- that will give the best return.
Your generosity in sharing your learnings is truly appreciated. 😊 It's heartwarming to witness knowledge being spread for the greater good of the community. We're committed to enhancing your investing journey and contributing to your success. 🌟📚
Key learnings from the video - Operating Leverage is when existing assets of a company starts yielding better productivity in unit economics i.e. there is larger increase in profits as compared to lesser increase in costs. The essence of the concept is that Expenses are front ended, whereas the profits from the expenses are generally back ended, so there is a time in a company's journey when expenses are already made, but those expenses have not yet started to yield their true potential. Identifying companies at this juncture of their journey can be fruitful. Parameters to identify Operating Leverage - 1. Increase in Asset Turns. 2. Increase in Capacity Utilisation of assets. 3. Expansion in Margins. 4. Better product mix. 5. Improving return ratios. Like Operating Leverage, it is very important to identify companies that can go through cycle of Operating Deleverage to protect capital. It is to note that high capital intensive industries like Chemicals and Pharma have tendency to go through more severe cycles of Leveraging and Deleveraging as they require big fixed costs upfront. Parameters to identify Operating Deleverage - 1. Decrease in Asset Turns. 2. Higher interest cost. 3. Higher depreciation. 4. Lower margins. 5. Worsening return ratios.
Yet again respect rises.. SOIC content are literally no where. For retailers you guys are goldmine of knowledge. I am sharing everyone who ever I know. Now I learn how to analyse business. Paaji you are amazing.
# Operating Leverage (Summary) > Lesser Expenses → More Profits - Important points(3) to keep in mind: - Sales growth - Expenses - Operating profit - Types of cost(2): - Fixed cost: - Initial investment - Not related to how much sales are generated - Variable cost: - Cost linked to sales - Increases/decreases proportional to sales generated
**MAST SIGNAL**
M → Margins Expansion
A → Asset turns improving
S → Signs in concall & interviews
T → Triggers linked to variant perceptions and return ratios playing out
S → Sales Growth
I → Increasing Capacity utilization
G → Growth in sales is much higher than expenses
N → New capex front ended and fruits backended
A → Assets turn improved and higher margin products
L → Lower costs due to backward integration or cheaper raw materials
Thank you for being a beacon of knowledge and sharing it with others. 😃 Your contribution to the community is invaluable, and we're thrilled to be a part of your journey. We'll keep striving to enhance your investing experience and empower you further. 🌟🤝
Saswikar Paaji, Happy teacher's day, you are my best teacher in life, really proud to get teacher like you in my life, you explain concepts very clearly, I have been in market for more than 15 years now, your teachings have made me a better investor, Thank you for all the great work you are doing for the society
Thank you so much for your warm Teacher's Day wishes and heartfelt words! We’re grateful for your support and delighted to know that our teachings have contributed to making you a better investor.🙏🏻
This is a killer video by SOIC. Lots & lots of learnings. 1. Operating Leverage is Sales grow at higher rate than costs 2. MAST SIGNAL. M-Margins Expanding A- Asset Turns improving S-Signs in Concalls T-Triggers Linked to Variant Perception S-Sales Grwoth I-Increasing Capacity Utilization G-Growth is higher in Sales than Costs N-New Capex A-Asset Turns Improve L-Lower costs due to backward integration 3. Different sectors have different reasons why Operating Leverage kicks in there. These are key variables in Sales (Need to watch the video quite a few times to take notes here. This is the best part of the video.) 4. How to find stocks where Operating Leverage might kick in.
We're immensely grateful for your willingness to share your learnings with others. 😄 It's inspiring to see knowledge being shared for the betterment of the community. Rest assured, we'll continue to add value to your investing journey and support your growth. 🤗🌈
Super learnings and insights KEY LEARNIGS FOR OPERATING LEVERAGE: 1) Sales Volume increase but cost is same or decreases. 2) CAPEX going live. 3) Asset turn over increasing exponentially. 4) Return ratios improving. 5) Cost to income improving in case of Banks.
Thank you for sharing your learnings with others. 😃 We're glad to see knowledge shared for the benefit of the community. We hope to continue adding value to your investing journey. 🤝
First of all, i would say that you are doing a great job in teaching and reaching Indian first time investors which will help many investors down the line in many years to come My key learning 1. Operating leverage and operating deleverage time period must be identified for every sector 2. Look for certain red signals like Peak PE, Peak Margins and Peak operating leverage 3. One must find which sector is light asset one or heavy asset one and have an eye on margins and profit... And keep learning and never stop going for the MAST signal ... Myself as a professor have learned a lot which will help me to transfer the same to my students... Thanks SOIC
Sir first of all i want to thank you for all your hard towards making investors community informed. I just want to share you something with you . Earlier i am unable to sit for 1 minutes for your videos but nowadays it just got changed, watching 1 hour videos in one or two go. I just learn from your videos and try to implement. I am just happy that i made some progress because of you
My learning 1.Read concalls. 2.Understand business in depth. 3. Find key metrics of industry. 4.Analyse Ratios 5.Not every capex will lead to operating leverage there are many more things to look behind that .
Nice learning for me today. My take aways were 1) operating leverage and deleverage can be a catalyst 2) can be used across stocks in same sector in filtering process 3) new MAST framework 4) different operating leverage metrics and it's respective dependency variables to be focused for different sectors
3 key learnings: 1. Operating leverage in simple terms is sales growth higher than expenses growth leading to spurt in operating margins 2. Important to identify triggers for sales growth based on the sector in which the company operates. For example, Average revenue per occupied bed (ARPOB) in case of hospitals. 3. Most sectors have high Capex requirements hence tracking asset turns is important as it is an early indicator of sales growth. Increasing asset turn ratio is what one wants ideally.
My learning 1) Logic for Operting leverage is that sales grows high/flat and same historical expenses leads to margin expansion. 2) During phase of Operating Deleverage its the best time to study businesses. 3) Using Technical filters to find businesses going through pain period. 4) Operating leverage doesn't just works in Asset heavy businesses. It also works in asset light business and can be tracked through volume growth.
Key Takeaways: 1) Understanding the correlation between sales growth, expenses, and operating leverage is crucial, and it varies across sectors. Different sectors' margins depend on their specific margin terms, like ARPOB in healthcare and ARR in the hotel industry. 2) To capitalize on operating leverage returns, it's advisable to stay active during the sector's "pain period" or deleveraging phase. 3) The combination of peak PE, peak margin, and peak operating margin is potentially risky. Future long-term investment strategies will focus on researching assets (CAPEX), sales growth, and operating profit margins (OPM) concurrently, with careful consideration of sectors while filtering stocks. Thanks for the insightful video!
Another Bang 💥 of a Video , Things I Learned ~ What Operating leverage really means and how it impacts the margins of a business . MAST Signal ~ That how operating leverage plays out how increasing in sales faster than expenses leads to operating leverage . Finding stocks where operating leverage is kicking in.
We're glad to know you find value in our content. Our team at SOIC is committed to adding value to your investing journey, and we look forward to providing you with more educational resources in the future. 🤜
We're glad to know you find value in our content. Our team at SOIC is committed to adding value to your investing journey, and we look forward to providing you with more educational resources in the future. 🤜
what a lovely wisdom for free of cost. This trailer just looks like a movie, then one should imagine about the value of SOIC content.. god bless u for your hard work Ishmohit...
Best opportunity to capture when operating leverage comes When income exceeds irrespective of expenditures. Outpacing expenses. Reasons can be many like volume increased or capex play out or shift in high margin product or acquisition of some good margin units or increase in utilization of production Best described as what to see as different sectors *MAST Signal* Margin expansion Asset turn improve Signs Triggers Signal Better to find any leverage triggers as volume growth, increase capacity utilization, etc.
My Learning:- 1)volume growth along with growth in price leads to increase in operating margins as fixed cost will not increase much. 2) when capacity utilisation increases in assets heavy business than it will results into increase in operating profit. 3) In case of Exchange business main expense is of software so volume growth is the trigger for growth in earnings.
Key Learning: Operating leverage is the parameter to which a company’s operating income changes concerning its sales and other expenditures. It reflects how much fixed costs and variable costs affect the profitability of a business. A company with high operating leverage has a high proportion of fixed costs and a low proportion of variable costs, which means that a slight change in sales can lead to a large change in operating income. This can be beneficial when sales increase, as the company can generate more profits without increasing costs. There are different conditions while checking the operating leverage in different business sectors.
My key learning from the video: 1) The operating leverage is an key indicator to identify the stock which can outperform in case of levearging in favour & underperform in case of deleraging in place. 2) Ways to identify the operating leverage in different sectors as each sector has unique way to look at. 3) In order to identify independently, retail investors needs to go beyond stock prices & learn to identify the sectors which are in favour, study concalls to understand what the management thinks of the coming quarters. Thanks to ishmohit & Soic for the wonderful learnings.
On a serious note, Ishmohit himself worked hard on this video to summarise it for us. Don’t know how many hours days of efforts it took for the entire SOIC team to compile this video and publish it :)
What an incredible video .. explaining key drivers of multiple sectors with such simplicity .. only Ishmohit ji @ SOIC can do this .. even for a seasoned market participant, worth seeing and absorbing the video again and again. Pl consider doing more detailed videos analysing newer companies / sectors .. or even revisiting and reanalysing older videos like the ones on KEI Inds., NH, Varun B, APL Apollo, HCG, etc. These videos add the most value. Regards 🙏
WoW - It doesn't matter viewer are investing or not but viewer becoming smarter . Unlocking Information/Gyaan for free . Whatever I know in my life is 80 percentage from Internet and 20 percentage from my formal edcuation .
Let's take an example of fixed lease which is 100rs/day. As you increase your production,your average fixed cost of 100rs/day will be divided among more units than before. so your per unit fixed cost will be lower so AFC will be downward sloping.However, Variable cost is little bit difficult if your workers have capacity to produce 100 units but you are producing only 10 your margins will be lower but as you reach 100 units your margins will be higher than before but what after 100?after 100 if demand is high then you have to hire new workers or ask your workers to do overtime so they will demand higher wages. so,your margins will diminish.That's why slope of AVC will be U curve due to diminishing marginal productivity of labour. For those who don't know breakeven point,Breakeven point is the point where your AR=ATC,if your cost increase more than that then you will suffer from losses. Love you ishmohit sir
We're happy to hear that our content is helping you learn. We appreciate you viewing our videos. 😃 We wish to keep enriching your investing experience. 🤝
Sir this soic channel is operating leverage for us in our investments for long term. Almost no cost(internet charges) but mega learnings. Thank you for this .👌
Key Takeaway from this Video: 1. Due to operating leverage, growth in sales results in non-linear growth in operating profit. Less Expenses and more Profit 2. A business that is asset-heavy communicates its role more clearly. MAST mental model 3. Worst Time to Purchase Stock: Peak P/E ratio (PEx). Peak margins. Peak operating leverage. 4. Different Sectors Have Different Matrix to Check.
My learning, Look at companies which are doing capex or spending on knowledge building. Then understand the general period their industries take to get the leverage. That way we can be a bit more prepared to buy when operating leverage actually kicks in. Otherwise if we see margin improvement, we will have the doubt that, is this a one time improvement or something has really changed.
Great video My learnings 1) Multiple sectors will have operating leverage in a very different way 2) While I learned in CFA impact of capex on different statements, but today learned how it translates into share price change 3) Technology sector can also have operating leverage..this was an eye opener
My learning from this video: 1. Look beyond technical indicators and have a more in depth analysis. 2. Each sector has a key ratio. 3. Find the sector going through operating deleveraging- that will give the best return. 4. The MAST framework.
Thank you for sharing your learnings with others. 😃 We're glad to see knowledge shared for the benefit of the community. We hope to continue adding value to your investing journey. 🤝
as per my analysis the perfect operating leverage will play in h2 in senco gold ltd (as fixed cost trigger ) and eco recycle( capacity utilization increase from 30 to 60% )
#SOIC Thanks sirji as always for your hard effort to help everyone here. Huge money is made in long term on right company (not stock 🙂) fed by patience. My uncle paid me to buy Pidilite in 2004 for 1000 INR. My salary was 5500 INR then. He told me I am buying so that you wont be forced to sell 😀 Just wish we all get such wise kins 🙏 Sharing here so that people can understand what right buying is all about. (Have lost money also when I played smart). #SOIC folks keep talking #rightinvesting so many times👍
Key learning Operating leverage takes years to build (no matter whichever sector it is) , always look out for gross block in balance sheet and capex plans ab proposed by the management. ( An investor should hold the stock for long term, as opposed to selling it as soon as the price start to rise, generally most common mistakes done by investor is that they hold stock for years, then sell as soon as the stock shows strong upside) . . Along with operating leverage, investor should also analyse that weather the asset build over a period of time is resulting in operating leverage or not, which could in headwinds could result in operating deleverage, . Also a point to note is the source of fund to create gross block, if too much debt is taken to create asset then at time of reaping profit, major chunk of the earnings could be swallowed by the interest cost..
Thank you Ishmohit for one more wonderful video on operating leverages with examples. I recollect my college days but not focussed like this at that time.
margin leverage nothing but the asset utilization in such an efficient manner helping in creating more top line number in the business that the break even happen more faster in Capex that help the company for more profit margin for a better bottom line. the company having niche product and pricing power do more wonders to this phenomenon
Hello sir, My Key learning Discussed Sector Key points, which we need to track in concalls and Investor presentation. And the conclusion part. I really want this book☺️ Little Greedy, But inta chalta hai Thank you for great insight on all the sectors. Jai Hind🫡
Thank you sir for your efforts to make us master in fundamental analysis 🙏❤ how to analysis the different buisness from different sectors with different parameters 🙏
Ishmohit you once mentioned that cos like CCL products do not have operating leverage, one reason i understood was due to fixed ebitda/ton as its a pass through contract. But still whenever they do capex, wont there be an element of operating leverage coz they wont reach peak utilisation immediately and pre op expenses might be hitting the pnl ? Pls clarify, thanks
Fantastic video ishmohit sir! as usual . I've been diving deep into this concept lately, and your detailed explanation has added a whole new layer to my understanding. The idea of assessing a company's fixed and variable costs mix is a game-changer. I've started incorporating this into my investment framework, meticulously analyzing financial statements to gauge the level of operating leverage. Balance between fixed and variable costs is crucial. It's intriguing to see how companies with excessive fixed costs can experience amplified earnings in economic upturns, but the flip side is the heightened risk during downturns. Striking that right balance seems to be the key. Combining this with considerations of industry trends, competitive positioning, and management quality is going to be a very useful to me in evaluating stocks. Your video has become an integral part of my financial education journey, and I'm eager to explore more insights from you. Looking forward to your next video! 🚀
Please give industry wise analysis youcan choose one cyclical like sugar,/ fertiliser one upcoming like drones/ EV and one past which grew and os now in stage 4 and likely move to stage 1
Sir please just a short video if possible on data patterns stock. If put into trishul mental model it fits in to margin expansion and also very high earnings growth. Please look into the stock.
Understanding from today's video 1. When we say operating leverage is playing out for a company, it means the company has begun to reap the benefits of what it sowed. 2. sales growth & profit growth no longer remain linear, but profit growth multiplies many times than sales growth. 3. For asset heavy businesses, operating leverage is very easily palpable. 4. It could be a good time to invest in a company which is going through operating de-leverage phase, if investor has the virtue, called PATIENCE
We're glad to know you're taking time out to study with us to become an intelligent investor. 🤝We hope to continue adding value to your investing journey. 🤞😃
We're glad to know you find value in our content. Our team at SOIC is committed to adding value to your investing journey, and we look forward to providing you with more educational resources in the future. 🤜
Operating leverage work when sells are constant but profit margin is increasing , What is Brown filed capex and grenn filed capex ,how it is work in hospitality industry What is ARR - average revenue per room Fixed asset are increasing and sales growth are constant but profit margin is increasing
Hello Ishmohit, how you view the carbon neutrality theme and AI to play out in different sector over next 5-7 years. Do you think you can make a presentation on that, thanks.
My learning
1, look beyond technical indicators.
2, each sector has a key ratio
3, find the sector going through operating deleveraging- that will give the best return.
Your generosity in sharing your learnings is truly appreciated. 😊 It's heartwarming to witness knowledge being spread for the greater good of the community. We're committed to enhancing your investing journey and contributing to your success. 🌟📚
Once again amazing video
Full of knowledge.
Key learnings from the video -
Operating Leverage is when existing assets of a company starts yielding better productivity in unit economics i.e. there is larger increase in profits as compared to lesser increase in costs. The essence of the concept is that Expenses are front ended, whereas the profits from the expenses are generally back ended, so there is a time in a company's journey when expenses are already made, but those expenses have not yet started to yield their true potential. Identifying companies at this juncture of their journey can be fruitful.
Parameters to identify Operating Leverage -
1. Increase in Asset Turns.
2. Increase in Capacity Utilisation of assets.
3. Expansion in Margins.
4. Better product mix.
5. Improving return ratios.
Like Operating Leverage, it is very important to identify companies that can go through cycle of Operating Deleverage to protect capital. It is to note that high capital intensive industries like Chemicals and Pharma have tendency to go through more severe cycles of Leveraging and Deleveraging as they require big fixed costs upfront.
Parameters to identify Operating Deleverage -
1. Decrease in Asset Turns.
2. Higher interest cost.
3. Higher depreciation.
4. Lower margins.
5. Worsening return ratios.
Yet again respect rises.. SOIC content are literally no where. For retailers you guys are goldmine of knowledge. I am sharing everyone who ever I know. Now I learn how to analyse business. Paaji you are amazing.
# Operating Leverage (Summary)
> Lesser Expenses → More Profits
- Important points(3) to keep in mind:
- Sales growth
- Expenses
- Operating profit
- Types of cost(2):
- Fixed cost:
- Initial investment
- Not related to how much sales are generated
- Variable cost:
- Cost linked to sales
- Increases/decreases proportional to sales generated
**MAST SIGNAL**
M → Margins Expansion
A → Asset turns improving
S → Signs in concall & interviews
T → Triggers linked to variant perceptions and return ratios playing out
S → Sales Growth
I → Increasing Capacity utilization
G → Growth in sales is much higher than expenses
N → New capex front ended and fruits backended
A → Assets turn improved and higher margin products
L → Lower costs due to backward integration or cheaper raw materials
- Crucial Triggers
1. Capacity Utilization
2. Capacity Expansion
3. Lag intangible operating leverage
4. Revenue mix transition
5. Acquisition synergy
Thank you for being a beacon of knowledge and sharing it with others. 😃 Your contribution to the community is invaluable, and we're thrilled to be a part of your journey. We'll keep striving to enhance your investing experience and empower you further. 🌟🤝
@@SOICfinance will I get the book? 🥺
Saswikar Paaji, Happy teacher's day, you are my best teacher in life, really proud to get teacher like you in my life, you explain concepts very clearly, I have been in market for more than 15 years now, your teachings have made me a better investor, Thank you for all the great work you are doing for the society
Thank you so much for your warm Teacher's Day wishes and heartfelt words! We’re grateful for your support and delighted to know that our teachings have contributed to making you a better investor.🙏🏻
With time your wisdom increase, watching it again give different perspective, Waiting for more such videos, ❤ishmohit,, helllll yessss
explosive video. isme itna kuch hai which can directly grow your profits. hats off to make such content free.
We're glad to know you find value in our content. We hope to continue adding value to your investing journey. 🤝😃
This is a killer video by SOIC. Lots & lots of learnings.
1. Operating Leverage is Sales grow at higher rate than costs
2. MAST SIGNAL.
M-Margins Expanding
A- Asset Turns improving
S-Signs in Concalls
T-Triggers Linked to Variant Perception
S-Sales Grwoth
I-Increasing Capacity Utilization
G-Growth is higher in Sales than Costs
N-New Capex
A-Asset Turns Improve
L-Lower costs due to backward integration
3. Different sectors have different reasons why Operating Leverage kicks in there. These are key variables in Sales (Need to watch the video quite a few times to take notes here. This is the best part of the video.)
4. How to find stocks where Operating Leverage might kick in.
We're immensely grateful for your willingness to share your learnings with others. 😄 It's inspiring to see knowledge being shared for the betterment of the community. Rest assured, we'll continue to add value to your investing journey and support your growth. 🤗🌈
Super learnings and insights
KEY LEARNIGS FOR OPERATING LEVERAGE:
1) Sales Volume increase but cost is same or decreases.
2) CAPEX going live.
3) Asset turn over increasing exponentially.
4) Return ratios improving.
5) Cost to income improving in case of Banks.
Thank you for sharing your learnings with others. 😃 We're glad to see knowledge shared for the benefit of the community. We hope to continue adding value to your investing journey. 🤝
First of all, i would say that you are doing a great job in teaching and reaching Indian first time investors which will help many investors down the line in many years to come
My key learning
1. Operating leverage and operating deleverage time period must be identified for every sector
2. Look for certain red signals like Peak PE, Peak Margins and Peak operating leverage
3. One must find which sector is light asset one or heavy asset one and have an eye on margins and profit...
And keep learning and never stop going for the MAST signal ...
Myself as a professor have learned a lot which will help me to transfer the same to my students... Thanks SOIC
Sir first of all i want to thank you for all your hard towards making investors community informed. I just want to share you something with you . Earlier i am unable to sit for 1 minutes for your videos but nowadays it just got changed, watching 1 hour videos in one or two go. I just learn from your videos and try to implement. I am just happy that i made some progress because of you
This is one of the most enlightening videos I have seen. Thanks a lot again SOIC team.
We're happy that you're taking learnings from our content.😃 We hope to continue adding value to your investing journey. 🤝
My learning
1.Read concalls.
2.Understand business in depth.
3. Find key metrics of industry.
4.Analyse Ratios
5.Not every capex will lead to operating leverage there are many more things to look behind that .
Sir …Why have u stopped sectoral analysis …it was really good
Next Sunday on Electronic components :)
Operating leverage is a must understand mental model!
@@SOICfinanceexited and waiting thanks a lot
That sectoral analysis series was so superb
Yes I agree as well pls. do sector analysis
Nice learning for me today. My take aways were
1) operating leverage and deleverage can be a catalyst
2) can be used across stocks in same sector in filtering process
3) new MAST framework
4) different operating leverage metrics and it's respective dependency variables to be focused for different sectors
3 key learnings:
1. Operating leverage in simple terms is sales growth higher than expenses growth leading to spurt in operating margins
2. Important to identify triggers for sales growth based on the sector in which the company operates. For example, Average revenue per occupied bed (ARPOB) in case of hospitals.
3. Most sectors have high Capex requirements hence tracking asset turns is important as it is an early indicator of sales growth. Increasing asset turn ratio is what one wants ideally.
Thanks a ton...I am now focusing on NBFC,s..Bajaj, Shriram, IIFL top pics
Operating Leverage खर्चे कम मुनाफ़ा ज्यादा 1. Fixed Cost 2. Variable Cost
Pre Production Cost
P❤oo
My learning
1) Logic for Operting leverage is that sales grows high/flat and same historical expenses leads to margin expansion.
2) During phase of Operating Deleverage its the best time to study businesses.
3) Using Technical filters to find businesses going through pain period.
4) Operating leverage doesn't just works in Asset heavy businesses. It also works in asset light business and can be tracked through volume growth.
Key Takeaways:
1) Understanding the correlation between sales growth, expenses, and operating leverage is crucial, and it varies across sectors. Different sectors' margins depend on their specific margin terms, like ARPOB in healthcare and ARR in the hotel industry.
2) To capitalize on operating leverage returns, it's advisable to stay active during the sector's "pain period" or deleveraging phase.
3) The combination of peak PE, peak margin, and peak operating margin is potentially risky.
Future long-term investment strategies will focus on researching assets (CAPEX), sales growth, and operating profit margins (OPM) concurrently, with careful consideration of sectors while filtering stocks.
Thanks for the insightful video!
Another Bang 💥 of a Video , Things I Learned ~
What Operating leverage really means and how it impacts the margins of a business .
MAST Signal ~ That how operating leverage plays out how increasing in sales faster than expenses leads to operating leverage .
Finding stocks where operating leverage is kicking in.
We're glad to know you find value in our content. Our team at SOIC is committed to adding value to your investing journey, and we look forward to providing you with more educational resources in the future. 🤜
My 3 metal model....
Learn----Apply(Earn)-----Teach to other....
Thank you SOIC
We're glad to know you find value in our content. Our team at SOIC is committed to adding value to your investing journey, and we look forward to providing you with more educational resources in the future. 🤜
what a lovely wisdom for free of cost. This trailer just looks like a movie, then one should imagine about the value of SOIC content.. god bless u for your hard work Ishmohit...
Best opportunity to capture when operating leverage comes
When income exceeds irrespective of expenditures. Outpacing expenses. Reasons can be many like volume increased or capex play out or shift in high margin product or acquisition of some good margin units or increase in utilization of production
Best described as what to see as different sectors
*MAST Signal*
Margin expansion
Asset turn improve
Signs
Triggers
Signal
Better to find any leverage triggers as volume growth, increase capacity utilization, etc.
My Learning:-
1)volume growth along with growth in price leads to increase in operating margins
as fixed cost will not increase much.
2) when capacity utilisation increases in assets heavy business than it will results into increase in operating profit.
3) In case of Exchange business main expense is of software so volume growth is the trigger for growth in earnings.
Key Learning:
Operating leverage is the parameter to which a company’s operating income changes concerning its sales and other expenditures. It reflects how much fixed costs and variable costs affect the profitability of a business. A company with high operating leverage has a high proportion of fixed costs and a low proportion of variable costs, which means that a slight change in sales can lead to a large change in operating income. This can be beneficial when sales increase, as the company can generate more profits without increasing costs.
There are different conditions while checking the operating leverage in different business sectors.
My key learning from the video:
1) The operating leverage is an key indicator to identify the stock which can outperform in case of levearging in favour & underperform in case of deleraging in place.
2) Ways to identify the operating leverage in different sectors as each sector has unique way to look at.
3) In order to identify independently, retail investors needs to go beyond stock prices & learn to identify the sectors which are in favour, study concalls to understand what the management thinks of the coming quarters.
Thanks to ishmohit & Soic for the wonderful learnings.
Thanks for this wonderful lesson☺️ For me, the best summary would be watching the video again and again until clarity kicks in
😅
Haha..hoping to get a free book. Blue ocean strategy😅
On a serious note, Ishmohit himself worked hard on this video to summarise it for us. Don’t know how many hours days of efforts it took for the entire SOIC team to compile this video and publish it :)
Very crisp & clear video on operating levearage , really very helpful analysis....👍
Very insightful.. knowledgeable..
What an incredible video .. explaining key drivers of multiple sectors with such simplicity .. only Ishmohit ji @ SOIC can do this .. even for a seasoned market participant, worth seeing and absorbing the video again and again.
Pl consider doing more detailed videos analysing newer companies / sectors .. or even revisiting and reanalysing older videos like the ones on KEI Inds., NH, Varun B, APL Apollo, HCG, etc. These videos add the most value. Regards 🙏
WoW - It doesn't matter viewer are investing or not but viewer becoming smarter . Unlocking Information/Gyaan for free . Whatever I know in my life is 80 percentage from Internet and 20 percentage from my formal edcuation .
Let's take an example of fixed lease which is 100rs/day. As you increase your production,your average fixed cost of 100rs/day will be divided among more units than before. so your per unit fixed cost will be lower so AFC will be downward sloping.However, Variable cost is little bit difficult if your workers have capacity to produce 100 units but you are producing only 10 your margins will be lower but as you reach 100 units your margins will be higher than before but what after 100?after 100 if demand is high then you have to hire new workers or ask your workers to do overtime so they will demand higher wages. so,your margins will diminish.That's why slope of AVC will be U curve due to diminishing marginal productivity of labour. For those who don't know breakeven point,Breakeven point is the point where your AR=ATC,if your cost increase more than that then you will suffer from losses. Love you ishmohit sir
MARVELOUS presentation....🔥🔥🔥🔥🔥🔥🔥
Fantastic video ishmohit sir
VERY INFORMATIVE... SO MUCH TO LEARN
We're happy to hear that our content is helping you learn. We appreciate you viewing our videos. 😃 We wish to keep enriching your investing experience. 🤝
Sir this soic channel is operating leverage for us in our investments for long term. Almost no cost(internet charges) but mega learnings. Thank you for this .👌
Your class of analysis is very high & we just pray that our association with you should continue life long Jai Hind🎉
Key Takeaway from this Video:
1. Due to operating leverage, growth in sales results in non-linear growth in operating profit. Less Expenses and more Profit
2. A business that is asset-heavy communicates its role more clearly.
MAST mental model
3. Worst Time to Purchase Stock:
Peak P/E ratio (PEx).
Peak margins.
Peak operating leverage.
4. Different Sectors Have Different Matrix to Check.
My learning, Look at companies which are doing capex or spending on knowledge building. Then understand the general period their industries take to get the leverage. That way we can be a bit more prepared to buy when operating leverage actually kicks in. Otherwise if we see margin improvement, we will have the doubt that, is this a one time improvement or something has really changed.
Great video
My learnings
1) Multiple sectors will have operating leverage in a very different way
2) While I learned in CFA impact of capex on different statements, but today learned how it translates into share price change
3) Technology sector can also have operating leverage..this was an eye opener
Sir,
what happened this year maximum stock has moving up?
this was one of the best videos of yours in 2023 !!!! great work again.
thank you for being so consistent with content.👌👌
Soic you started new era. Of market analysing
Key Learnings :
1. Margins expanding - Sales growing faster than expenses
2. Revenue mix shifting towards high margin products / services
3. Costs remain controlled due to lower Input Costs / improved Operational Efficiency
4. CapEx increasing steadily and Capacity Utilisation (Asset Turns) improving
5. Strong management and execution of M&A / JV / Partnerships; Innovation / R&D
* Beware of "Operating Deleverage" scenario
We're happy to know our content is resourceful for learners like you. We hope to continue adding value to your investing journey. 🤞😃
@@SOICfinance Please keep up the great work, your focus on learning and and preparing us to wait for the right opportunity is amazing!
Revision done - Due to your tweet.
My learning from this video:
1. Look beyond technical indicators and have a more in depth analysis.
2. Each sector has a key ratio.
3. Find the sector going through operating deleveraging- that will give the best return.
4. The MAST framework.
Thank you for sharing your learnings with others. 😃 We're glad to see knowledge shared for the benefit of the community. We hope to continue adding value to your investing journey. 🤝
SIr your education analysis is always best and can't express it, Simple thanks for your these kind of help!!!!
SOIC jesa koi nahi, thanks for teach us
as per my analysis the perfect operating leverage will play in h2 in senco gold ltd (as fixed cost trigger ) and eco recycle( capacity utilization increase from 30 to 60% )
Very interesting video😊
#SOIC Thanks sirji as always for your hard effort to help everyone here. Huge money is made in long term on right company (not stock 🙂) fed by patience. My uncle paid me to buy Pidilite in 2004 for 1000 INR. My salary was 5500 INR then. He told me I am buying so that you wont be forced to sell 😀 Just wish we all get such wise kins 🙏 Sharing here so that people can understand what right buying is all about. (Have lost money also when I played smart). #SOIC folks keep talking #rightinvesting so many times👍
Sir can u pls share screen link which u used in video .
learned so much thanks a lot
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Key learning
Operating leverage takes years to build (no matter whichever sector it is) , always look out for gross block in balance sheet and capex plans ab proposed by the management. ( An investor should hold the stock for long term, as opposed to selling it as soon as the price start to rise, generally most common mistakes done by investor is that they hold stock for years, then sell as soon as the stock shows strong upside) .
.
Along with operating leverage, investor should also analyse that weather the asset build over a period of time is resulting in operating leverage or not, which could in headwinds could result in operating deleverage,
.
Also a point to note is the source of fund to create gross block, if too much debt is taken to create asset then at time of reaping profit, major chunk of the earnings could be swallowed by the interest cost..
Thank you Ishmohit for one more wonderful video on operating leverages with examples. I recollect my college days but not focussed like this at that time.
Can the same model be applied to QSR chains as they are on store expansion spree which will lead to fixed assets
Always learning something new from your videos 👍 ❤❤
We're happy to know our content is resourceful for learners like you. We hope to continue adding value to your investing journey. 🤞😃
margin leverage nothing but the asset utilization in such an efficient manner helping in creating more top line number in the business that the break even happen more faster in Capex that help the company for more profit margin for a better bottom line. the company having niche product and pricing power do more wonders to this phenomenon
What is the difference between fixed cost and pre-production cost ? or are these same ?
Great Effort, Great video
Hii Ishmohit
How can I get or build that Screen containing Industry with EMA and all?
Awesome sir
Thanks a lot Sir for all the info.. this really helps in looking the businesses in a different way. Kudos to you.
what a great session sir .truely ur way of teaching is exceptional
sir how to know the company at its peak pe ,pick margin, peak opreating leverage
Hello sir,
My Key learning
Discussed Sector Key points, which we need to track in concalls and Investor presentation. And the conclusion part.
I really want this book☺️
Little Greedy, But inta chalta hai
Thank you for great insight on all the sectors.
Jai Hind🫡
Thank you sir for your efforts to make us master in fundamental analysis 🙏❤ how to analysis the different buisness from different sectors with different parameters 🙏
Ishmohit you once mentioned that cos like CCL products do not have operating leverage, one reason i understood was due to fixed ebitda/ton as its a pass through contract. But still whenever they do capex, wont there be an element of operating leverage coz they wont reach peak utilisation immediately and pre op expenses might be hitting the pnl ? Pls clarify, thanks
Fantastic video ishmohit sir! as usual .
I've been diving deep into this concept lately, and your detailed explanation has added a whole new layer to my understanding. The idea of assessing a company's fixed and variable costs mix is a game-changer. I've started incorporating this into my investment framework, meticulously analyzing financial statements to gauge the level of operating leverage.
Balance between fixed and variable costs is crucial. It's intriguing to see how companies with excessive fixed costs can experience amplified earnings in economic upturns, but the flip side is the heightened risk during downturns. Striking that right balance seems to be the key.
Combining this with considerations of industry trends, competitive positioning, and management quality is going to be a very useful to me in evaluating stocks. Your video has become an integral part of my financial education journey, and I'm eager to explore more insights from you. Looking forward to your next video! 🚀
Please give industry wise
analysis youcan choose one cyclical like sugar,/ fertiliser one upcoming like drones/ EV and one past which grew and os now in stage 4 and likely move to stage 1
We appreciate your suggestions. We'll keep them in mind for our future content. 😃 We hope to continue adding value to your investing journey. 🤞
Sir ,Can a govt employee buy shares independently...
Sir please just a short video if possible on data patterns stock. If put into trishul mental model it fits in to margin expansion and also very high earnings growth.
Please look into the stock.
Understanding from today's video
1. When we say operating leverage is playing out for a company, it means the company has begun to reap the benefits of what it sowed.
2. sales growth & profit growth no longer remain linear, but profit growth multiplies many times than sales growth.
3. For asset heavy businesses, operating leverage is very easily palpable.
4. It could be a good time to invest in a company which is going through operating de-leverage phase, if investor has the virtue, called PATIENCE
Kindly make video on how to utilise MARKET SMITH tools
Thank You for such a detailed class 🙏🙏🙏
shandaaar jabardast!!!!!!
😊🙌
Brilliant breakdown with case studies. Finance professors, take notes!
We're glad to know you're taking time out to study with us to become an intelligent investor. 🤝We hope to continue adding value to your investing journey. 🤞😃
Thank you sir
This is a gold video of decoding value investing.
We're glad to know you find value in our content. Our team at SOIC is committed to adding value to your investing journey, and we look forward to providing you with more educational resources in the future. 🤜
Operating leverage work when sells are constant but profit margin is increasing ,
What is Brown filed capex and grenn filed capex ,how it is work in hospitality industry
What is ARR - average revenue per room
Fixed asset are increasing and sales growth are constant but profit margin is increasing
Sales growth increases hoga tabhi profit margin increase hoga
Kindly share the Stockscan tool link
❤Amazing study sir
Very Informative Video , as always. :) Thanks!!
thank you Papaji
🙏🏻🙏🏻
Good knowledge sharing 👍
Why power fixed cost ?
AN ASSET LIGHT BUSINESS WITH POSITIVE OPERATING LEVERAGE IS GOOD FOR INVESTMENT
Mutual fund series' shuru kijiye 🔥
Thank you for your efforts
Great analysis sir
Higher the Fixed Costs when compared to the Variable costs,this Creates Operating leverage.
The Silde with lauras Labs it doesnot make any sense !
Fantastic 🎉
Hello Ishmohit, how you view the carbon neutrality theme and AI to play out in different sector over next 5-7 years. Do you think you can make a presentation on that, thanks.
Great video, Thanks for the efforts
Really great session again sir
Operating leverage se OPM badh jata he.kharcha same rehta he but sales badhne se profit margins badh jata he.
Thanks ❤
Sir fantastic it's very good and value Knolawge sir plz can you make video on agro based paper business like satia industry
1. OPERATING LEVERAGE AND MAST SIGNAL
2. SECTORWISE OPERATING LEVERAGE
3. HOW TO FILTER THEM