Identifying quality Swiss stocks and promoting them (3/6)

CRITERION 1: ROE

ROE (return on equity) is the return on equity, or return on equity. It is simply calculated by dividing net income by equity.

Return on equity gives us the financial profitability of a company. ROE measures a company's ability to generate profits from its equity alone (capital less debt).

We can also use ROIC (return on invested capital) which is very similar.

CRITERION 2: NET PROFIT MARGIN

The net profit margin (NPM), also called net margin or sales profitability ratio, shows how much profit after tax (= net profit) is generated by each franc of turnover.

Net margin is used to determine what a company earns after all its expenses have been paid.

Let's compare the ROE (red line) and net profit margin (blue line) values for EMS Chemie and Schaffner:

At EMS Chemie we are not only seeing very high values, but also steadily increasing ones.

At Schaffner, these values are low, lamentable, anemic, not to say anorexic... In addition to being so low, these values show a generally downward trend and are highly variable and unpredictable from one year to the next...

CRITERION 3: % OF EQUITY

This value informs us about the indebtedness, respectively the solvency of a company.

A company with a lot of debt can quickly find itself with its head under water.

The proportion of equity depends a lot on the sector of activity, but let's say that as a general rule, debts should not exceed 50-60%. In any case, equity below 30% is for me eliminatory. On the other hand, equity of 60 to 80% is absolutely divine!

What do our two companies offer us?

Here too, EMS takes us to the land of fairy tales with extremely high and even increasing equity! What financial strength!

As expected: Schaffner is in a mess... Equity is very low and even slightly decreasing...

But what about their dividends now?

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