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STOCK ANALYSIS :-Structure Conduct Performance Analysis (SCP - Analysis)

   · In this one we are gonna discuss about an analysis by which you can use to find best company to invest in . The name itself clarifies that in this analysis we analyze about structure, conduct and performance of  the stock or company so let's discuss it thoroughly bellow :-



                                                                                                                 *image credit:- www.alamy.com


· Structure Conduct Analysis or SCP Analysis :-

1) Structure Analysis -

Industry structure refers to the competitive intensity in the industry (numbers of players in particular field) , construction of the business in industry , relationship among the various players , market size , companies growth rate etc.

         · In this section an analyst analyzes about -

    1) How many players exists in industry .

    2) Is there domination of few players in the industry e.g. in telecom there are domination of Bharti              Airtel Ltd and one and only Jio that is Reliance Industries Limited .

    3) How business is scattered between organized and unorganized players .

    4) Are there any threat from substitute products .

    5) How is the equation between suppliers and buyers .

    6) Is there backward / forward integration already in existence or a possibilities in future .

So this is it for the Structure Analysis  .

2) Conduct Analysis -

Umbrella and raincoats would be seasonal business and FMCG or Pharma round the year ones .

      · In conduct analysis analyst have to study about -

    1) Is business cyclic in nature ?

    2) If business is cyclic then what are the factors affecting the business for example factors like Commodities , Price , Interest rates , Currency price , some other global factors .

    3) Is the business is a highly specialized business which requires skilled labourers or it is a low skill based industry 

    4) For skill based business is there enough talent available .

    5) How customer chooses choose the product / service .

    6) How can technological change affects the business .

    7) Is business highly dependent on Government Policies ?

So this is it for the Conduct Analysis .

3) Performance Analysis -

Its quite obvious that company with great sales can generate high profit and if sales are in increasing that is performance is also increasing . Business with high return on capital or on equity are the ones which creates wealth for shareholders (owner of the company) in long run .

      Performance of a company varies from company to company so let's discuss about some key industry priors :-

    1) Telecom - A key parameter while analyzing telecom sector is average revenue per unit (ARPU) . It is calculated by total revenue divided by number of subscribers and higher the ARPU the better sign is for the company .

    2) IT/BPO/KPO - It sector also earns in dollar or in other foreign currency and spent in rupees . Thus  USDINR rate, Attrition rate among employees , Concentration of revenues with selected clients , concentration of geographic etc. are the important parameters to watch out for in IT and related sector.

    3) Banking / NBFC / Housing - Monetary policies by the RBI affects on banking and NBFC'S (Non-Banking Financing Company) .NPA  (Non Performing Assets) levels also affects these banking sectors higher NPA are bad for any company related to this sector , NPA are generally low as interest rates are low due to low EMI (Equated Monthly Installment) . So we must check out NPA levels before investing in one in this sector .

    4) Media - This is for both whether electronic or print media, content and viewership are king . TRP (television rating points) affects business like media mostly .

    5) Retail - Retail business is like selling things that is buying things and sell those with higher rate , thus margin plays the important role in these types of businesses . So we should check margins in the retail business .

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So that's it for the SCP analysis if you want to know about more articles then stay tune for the another one and do comment if you like this one .

THANK YOU 




     

 

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