High cash-yielding smallcaps and midcaps that become MF favourites
A high free cash flow indicates the three major aspects –profitability, growth and return. It provides a room for more growth opportunities, dividend payouts and debt reduction in a company
Free cash flow (FCF) is one of the matrices that active fund managers use while picking the stocks. FCF is cash available to a company after all operational and business expenses. A FCF indicates the three major aspects –profitability, growth and return to the equity holders of the company. It allows for more growth opportunities, regular dividend payouts, and debt reduction. Ravi Saraogi, co-founder of Samasthiti Advisors says, “FCF is an important metric to understand the quality of earnings reported by a company. As per capital market theory, stocks are valued based on future dividend streams. The most prominent stock valuations methodology discounts these future dividend streams to the present and compares the same to the current price at which a stock is trading. FCF is a metric that can be used to evaluate potential dividend paying capability of businesses. However, more importantly, fund managers look at FCF is hard for management to fudge, whereas accrual income has a much larger leeway for being massaged as per management's liking”. Here are the MF’s most favorite midcap and smallcap companies that consistently grew cash from their operation between 2018 and 2022. Companies that registered relatively higher revenue growth during those period were also considered while shortlisting those stocks. Portfolio data as of January 31, 2023. Source: ACEMF.
2/16
Oil India MCAP type: Mid-cap Growth of Free Cash Flow (between 2018 and 2022) (in CAGR): 188% Growth of Revenue (between 2018 and 2022) (in CAGR): 29% Debt-to-equity ratio (in times): 0.54 No. of active MF schemes that held the stock: 11
3/16
Ajanta Pharma MCAP type: Small-cap Growth of Free Cash Flow (in CAGR): 157% Growth of Revenue (in CAGR): 12% Debt-to-equity ratio (in times): Nil No. of active MF schemes that held the stock: 48
4/16
Indian Energy Exchange MCAP type: Small-cap Growth of Free Cash Flow (in CAGR): 155% Growth of Revenue (in CAGR): 17% Debt-to-equity ratio (in times): Nil No. of active MF schemes that held the stock: 15
5/16
Affle (India) MCAP type: Small-cap Growth of Free Cash Flow (in CAGR): 103% Growth of Revenue (in CAGR): 90% Debt-to-equity ratio (in times): 0.13 No. of active MF schemes that held the stock: 27
6/16
Jindal Steel & Power MCAP type: Mid-cap Growth of Free Cash Flow (in CAGR): 85% Growth of Revenue (in CAGR): 23% Debt-to-equity ratio (in times): 0.36 No. of active MF schemes that held the stock: 75
7/16
Finolex Industries MCAP type: Small-cap Growth of Free Cash Flow (in CAGR): 60% Growth of Revenue (in CAGR): 13% Debt-to-equity ratio (in times): 0.07 No. of active MF schemes that held the stock: 19
8/16
Tube Investments of India MCAP type: Mid-cap Growth of Free Cash Flow (in CAGR): 50% Growth of Revenue (in CAGR): 25% Debt-to-equity ratio (in times): 0.26 No. of active MF schemes that held the stock: 55
9/16
Abbott India MCAP type: Mid-cap Growth of Free Cash Flow (in CAGR): 46% Growth of Revenue (in CAGR): 11% Debt-to-equity ratio (in times): Nil No. of active MF schemes that held the stock: 72
10/16
Gateway Distriparks MCAP type: Small-cap Growth of Free Cash Flow (in CAGR): 42% Growth of Revenue (in CAGR): 16% Debt-to-equity ratio (in times): 0.31 No. of active MF schemes that held the stock: 26
11/16
Prudent Corporate Advisory Services MCAP type: Small-cap Growth of Free Cash Flow (in CAGR): 42% Growth of Revenue (in CAGR): 22% Debt-to-equity ratio (in times): Nil No. of active MF schemes that held the stock: 23
12/16
Bayer CropScience MCAP type: Mid-cap Growth of Free Cash Flow (in CAGR): 40% Growth of Revenue (in CAGR): 19% Debt-to-equity ratio (in times): Nil No. of active MF schemes that held the stock: 24
13/16
Gujarat Gas MCAP type: Mid-cap Growth of Free Cash Flow (in CAGR): 36% Growth of Revenue (in CAGR): 28% Debt-to-equity ratio (in times): 0.09 No. of active MF schemes that held the stock: 87
14/16
Gland Pharma MCAP type: Mid-cap Growth of Free Cash Flow (in CAGR): 35% Growth of Revenue (in CAGR): 28% Debt-to-equity ratio (in times): Nil No. of active MF schemes that held the stock: 98
15/16
Astral MCAP type: Mid-cap Growth of Free Cash Flow (in CAGR): 34% Growth of Revenue (in CAGR): 20% Debt-to-equity ratio (in times): 0.04 No. of active MF schemes that held the stock: 65
16/16
AU Small Finance Bank MCAP type: Mid-cap Growth of Free Cash Flow (in CAGR): 29% Growth of Revenue (in CAGR): 35% Debt-to-equity ratio (in times): 0.8 No. of active MF schemes that held the stock: 52
