There are some key aspects we need to look at with respect to fundamentals of a company.

Fundamental value comes from growth so always look for growth in top line and in bottom line. Growth is the primary motivation. After all, you want to invest in a company that grows. We are talking about growth in business volumes, growth in revenues and also growth in profits. It is only when these 3 combine that you will have an attractive proposition. Higher growth means higher valuations in the market.

Top line is great but your actions need to be profitable and that comes from margins. Profitability is the key. Eyeballs and footfalls can only take you that far. Your business needs to be profitable. What is the net profit margin and what is the operating margin. This will tell you how good are the business. Check the ROE and the ROCE of the company. That will tell you how well the company deploys its capital.

Are you really running your business efficiently? That is the million dollar question. Efficiency is the binding force. You have up cycles and down cycles in a business. What holds a business together in tough times is the efficiency of operations. How efficiently the company churns its total assets and fixed assets? How well is the working capital of the company managed? All these add up to efficiency.

Among the various intangible strengths of a company, brand is one of the most powerful. Brand, by itself is valuable and adds to the value of the company. Brand image is what will give you the advantage in a competitive market. Companies like Hindustan Unilever, Britannia, HDFC Bank and TCS have built a formidable brand in the market. That is why they get premium valuations in the market. Brand image is an intangible factor and cannot be seen or felt, but it can be experienced and monetized.

Pedigree matters when it comes to the quality of the management and the business house. Management quality separates the wheat from the chaff. A good management can make a success out of a mediocre business but a mediocre management can make a mess of even the best of businesses. Generally, companies with solid managements tend to outperform their peers as well as the index overall.

Are you making something different or doing something differently. What is your unique competitive advantage in the business? Business moat is the unique advantage that you have created in the business. It could be a unique product, a special distribution channel, some key entry barrier or a brand that cannot be replicated. The value of the business comes from the moat and it is companies with moat that are better equipped to handle disruptions in the business.