RS Software – Multibagger Analysis

For few weeks I am observing RS Software on the limelight – more investors and mutual funds are choosing it.

Is it valid to purchase an already spiked stock?

A value investor ensures the spikes did not made the stock over priced based on value parameters.

About RS Software

RS Software has focused exclusively on the payments industry since its inception in 1991. Our payments expertise has helped clients address the convergence of payment types, the proliferation of mobile devices, the move to cloud computing and the introduction of new strategies, such as behavioral targeting. No other custom software provider delivers more industry-specific knowledge and experience to organizations competing for market share in the payments space.

Company URL: http://www.rssoftware.com/

Analysis URL: http://www.screener.in/company/517447

CMP: 525

Warren Buffett Checklist

History of Consistently Increasing Sales, Earnings & Cash Flow	Yes.
Durable Competitive Advantage	Yes.  Company is into payment verification business & own a niche share in India.
Future Growth Drivers	Yes.  Growing market.
Conservative Debt (long term debt < 3 Net Profit)	Yes.
Return on Equity must be Above Average	Yes.  Company have 38% where we prefer 15% as the average.
Low CAPEX required to maintain current operations	Average.
Management is holding / buying the stock	Yes. 38%.  Promoters increased holding 2 years back.
Price is Under Valued (< intrinsic value)	Yes.  Considering 30%-50% growth the company is trading below its Intrinsic Value.
Stock Price is consolidating (now)	Not.  Only recently the stock witnessed high price movements.
Stock Price is growing in past years along with EPS growth	Yes.

 

Additional Futurecaps Checklist

PE, PB Ratio	PE: 12; PB 3; Average
Cash Flow Positive, Net Profit % greater than 8%	Cash Flow is Positive.  Net Profit is around 12% which is Good.
Paying Dividends, Tax	Yes.
EPS Growth Rate	10% in latest year; 50% in previous year;
Jump in Trailing Results	Not.
Quarterly Results Growing	Latest quarter shows 50% jump too which is hopeful.
Expected Gain in 10 Years	Considering average EPS growth of 30% & PE resizing to 20, we can expect the company to give 5-6 times returns in 5 years & Upto 25 in 10 years.
Volume Analysis	High Volume is there; We do not recommend that.
Power of Brand	Good Brand is there.
Corporate Governance, Reputation of Leaders	Good.
Fraud reported	Not in current search.

Declaration

Considering the latest quarter & expecting 30%-50% growth in upcoming quarter, coupled with the recent limelight effect on the stock which should attract more investors, we declare the stock as a multibagger.

But watch upcoming quarter carefully.

Allocation

2% to 3% of your portfolio.  Buying on installments advised.

Disclaimer

Futurecaps recommends 20 to 25 multibaggers per year, we recommend a 25% to 50% allocation of your savings in equity.  The stocks recommended here are gone through Analysts of several years experience in stock market.  Although they were successful in predicting future multibaggers, the overall stock market is a risky game.  So we recommend the reader to put his/her own thoughts & invest wisely.

About Futurecaps

Futurecaps is a 12+ year experienced Indian Stock Market Advisory with SEBI Registration.

New Year Offer

Click below to avail the New Year Offer! (only for few days)