1. Superior profit margins earned on a consistent basis leads to higher valuations.

Valuation ratios like P/E, EV/EBITDA, EV/Sales, Price to Book value, and Price to Sales are dependent on the companys ability to earn better operating profit margins, net profit margins, Return on Capital Employed (ROCE), Return on Equity (ROE) and Return on Assets than its peers in the same sector. 2. Judicious use of debt enabled the high valued companies to trade on their equity more efficiently. Moreover higher profitability leads to cheaper debt and lower cost of capital.

3. Contrary to common perception, a higher current ratio need not necessarily be a good thing always because it may imply greater amount of funds than necessary being blocked up in current assets. High valued companies sometimes have lower current ratios and free up extra cash from current assets. 4. High valued companies generally have lower operating cycles which mean faster churning of cash and receivables in the organization. 5. On the disclosures front, transparent and investor-friendly disclosures lead to buildup of investor confidence in the companys management which is then reflected in higher valuations 6. In terms of shareholding pattern, high valued companies have an evenly spread pattern among FIIs, DIIs, Corporate Bodies, Public and Promoters. FIIs and DIIs mainly drive prices. Lower promoter holdings for these companies also translate into higher liquidity on the stock exchanges. 7. Quality of Board of Directors has a major role to play in a companys policies and strategies. High valued companies have a greater proportion of their directors who are on the board of other listed companies as Directors or Chairmen. In the case of casting sector, contrary to expectations, high valued companies have a lower percentage of independent directors than medium valued companies. 8. Renowned auditors give investors faith that the management is safeguarding their interests. Prominent investors who hold a major stake in the company also drive up share value since they have a vital say in the companys strategies.

9. Quality of Management Discussion and Analysis (MD&A) is a good barometer of the strength and confidence of management in its own performance. Study of target achievement rate has revealed that high valued companies define clear cut targets in their MD&A and go about achieving them on time year after year. Also they provide forward look statements and guidances which are consistently met as a practice.