Which are the top high profit smallcap companies in India right now?
As per Equitymaster's Stock Screener, here is a list of the top high profit smallcap companies in India right now...
These smallcap companies have been ranked as per the most recent financial year's net profit margin. The net profit margin measures how much profit a company generates as a percentage of its revenue. The higher, the better.
However, there are other parameters you should take into account as well before forming a hard opinion on the stock.
How is net profit margin calculated?
The net profit margin of a company is calculated by dividing net profit by total revenue.
Net profit margin = Net profit / Total revenue
Profit margins vary across industries, so it's important to consider all possible factors when evaluating the net margins of different companies.
What are smallcap stocks?
According to the market regulator, smallcap stocks are companies which rank 251st and beyond in terms of their market capitalisation.
Investing in them is perceived to be risky. However, the potential for higher returns makes them an appealing investment avenue.
How much should you invest in smallcap stocks?
According to us, in a scenario of ideal allocation of funds, small cap stocks should not comprise more than 10% of one's total equity portfolio.
Further, we believe that a single small cap stock should ideally not form more than 2-3% of the total portfolio.
Please note that this allocation will vary from person to person. For something that works best for you, we recommend you talk to your investment advisor.
Why is it important to assess the profitability of a company?
Profitability is the primary goal of all business ventures. Without profitability, the business will not survive in the long run. So, measuring current and past profitability and projecting future profitability is very important.
Profitability of a company can be assessed in several ways, including its profit margins, return ratios.