Some Of The Ignored Performance Ratios By Small Investors

Generally, being a small investors, we tend to forget or ignore looking at some of the very important factors, which could drive the stock prices, and then, suddenly, we start questioning ourselves that, in spite of me being invested in very good company, why am I not getting good returns! That probably, could be, because my company, is not that good, on some of the below mentioned parameters.
However, that doesn't mean, that I will start considering only these factors, and ignore others.
These factors come into picture based on context and one has to realize that.

1) ROE (Return On Equity):

It is used as an indicator to figure the company's profitability against the money invested in it. It is calculated by dividing the net income by the shareholders equity.

ROE = (Net Income) / (Shareholder's Equity) * 100 %

ROE is generally calculated and useful, if on average basis for last 3, 5 or 10 years, because 1 year can't be used as an indicative parameter.
Make sure that we compare the ROE within the same sector, as it could be varying depending on the sector, and the average profit that the company in respective sector, makes.

We can expect a higher ROE for the companies with higher growth.

Some of the companies with Average ROE above 30 for past 5 years are Hero Motocorp, Atul Auto, Kaveri Seeds Company, Dhanuka Agritech, Ajanta Pharma, Suven Life Science, Mayur Uniquoters, Symphony, Page Ind, Asian Paints etc.

2) ROCE (Return On Capital Employed):

As we saw that we are using Shareholder's Equity as dividend while calculating ROE. Here in case of ROCE, we will add debt liabilities also as part of dividend, which will make the figure known as total capital employed. Also, instead of using net income, we will be using earnings before interest and tax, as a parameter to calculate ROCE.

ROCE = (Earnings Before Interest & Tax) / (Total Capital Employed) * 100

This is one of the factor which takes a hit, if we have a high debt company. As ROE, ROCE is also generally considered as an average for last 3, 5 or 10 years, and based on sector.

A higher ROCE is indicative of the fact that company is making more effective use of its capital.

Some of the companies with Average ROCE above 30 for past 5 years are Atul Auto, Cera Sanitaryware, Kaveri Seeds Company. Avanti Feeds, Dhanuka Agritech, Mayur Uniquoters, Symphony, Page Ind, Wimplast, Asian Paints etc.

3) ROA (Return On Assets):

It is a measures of what a company earns per each unit of the asset it holds. It represents how efficient the management is in generating income from the assets it has. It is calculated by dividing the net income by total assets on annual basis.

ROA = (Net Income) / (Total Assets) * 100

Again, it varies tremendously based on sectors, so inter-sector comparison is not advisable at all.
The higher ROA is considered better, because the company is earning more money on less investment, which is always taken as positive.

Some of the companies with Average ROA above 30 for past 5 years are Atul Auto, Hero Motocorp, Cera Sanitaryware, Kaveri Seeds Company, Dhanuka Agritech, Mayur Uniquoters, Ajanta Pharma, Symphony, Page Ind etc.

Note:
The entire concept of putting the examples of companies,  qualifying each of the selected criteria, is to make readers aware that, why these companies are trading at such high valuations. Just look at all the names mentioned, and check their present value. All may seem trading at very high price, but there is a reason behind it, which is justified above.

Hope it helps!!!!