Of the 497 companies traded on the Istanbul Stock Exchange, 480 announced their 2022 results.

I renewed the assessment I made and shared with you at the end of September.  

When we set aside the shares of banks, insurance, non-bank finance, holding companies and investment trusts, the number of companies decreases from 480 to 347, which fall into the categories of industry, construction, trade, etc. 

Everyone has their own filter, but my 7 filters consist of 3 levels.

Of these, 33 (9.5%) are at the top of all 7 filters.

There are 3 filters in the category of coping with inflation (I accepted the inflation rate as 100%).

1. Increasing turnover by more than 100% (347>209) 60%
2. Increased earnings before interest and tax by more than 100% (209>142) 41%
3. Increased Net Profit by more than 100% (142>103) 30%

I also have 3 filters in the efficiency and effectiveness category.

1. Can increase gross margin (103>74) 21
2. Can increase earnings before interest and tax margin (74>69) 20
3. Able to increase Net Profit margin (69>61) 17.5%

Last but not least, a company that can satisfy Equity investors

Able to increase the rate of return on equity (ROE) (61>33) 9.5%  

….

I repeated these filters for companies in the famous BIST30 index. 

When we set aside banks and holdings, we are left with 23 companies to screen. 

Only 2 of them (9%) were above all 7 filters. 

….

I did not do it for BIST 100 companies, but I repeated the same calculation for the 100 companies with the highest turnover among the companies traded on the stock exchange. These 100 companies consisted of companies that made more than 4 billion TL in 2022. 54 of these companies are included in the index designated as BIST 100. 

Only 8 of them remain at the top in all 7 filters. When we evaluate them in the same categories

Category of coping with inflation:

• Increased turnover by more than 100% (100>70). 70% vs. 60% (first large sample)
• 47% vs. 41% (first large sample) who increased their earnings before interest and tax by more than 100% (70>47)
• More than 100% increase in Net Profit (47>34) 34% vs 30% (first large sample)

Efficiency and effectiveness category:

• Able to increase gross margin (34>22) 22% vs 21% (first large sample)
• Able to increase earnings before interest and tax margin (22>19) 19% vs 20% (first large sample)
• Able to increase Net Profit margin (19>17) 17% vs 17.5% (first large sample)

Last but not least, a company that is able to satisfy its equity investors

Able to increase the rate of return on equity (ROE) (17>8) 8% vs 9.5% (first large sample)

What is striking is that in the first category, coping with inflation, the top 100 companies outperformed the broader sample, while in the second category, effectiveness and efficiency, the gap closed.

….

I repeated the same calculation by listening to those who say official inflation is 65%.  

In the large sample of 347 companies, the number of companies above 7 filters increased from 33 to 42.

In the sample of 100 companies with a turnover of over 4 billion TL, the number of companies above 7 filters increased from 8 to 12.

….

“What did you do, the inflation we feel is higher, even the revaluation rate is 122%,” I repeated the same calculation.  

In the large sample of 347 companies, the number of companies above 7 filters dropped from 33 to 25.

In the sample of 100 companies with a turnover of over TL 4 billion, the number of companies above the 7 filter dropped from 8 to 6.

In other words, only 6 out of 100 large companies remained above the 7 filters. 

….

Assuming that the 100 companies with a turnover of more than 4 billion TL are relatively mature and stagnant companies, and therefore eliminated from the efficiency and effectiveness filters, I looked at the second 100 companies. 

The second 100 consisted of 100 companies with turnover between 850 million TL and the previous sample’s starting point of 4 billion. That’s a pretty wide range (16 of these second 100 companies are included in the index designated as BIST 100).

• Here, assuming 100% inflation, I found 14 companies. I could only find 8 companies in the first 100.   
• With the 65% inflation assumption, I identified 17 companies. I could only find 12 companies in the top 100.   
• With a 122% revaluation rate inflation assumption, I found 12 companies. I could only find 6 companies in the top 100.   

We can assume that the companies in the second 100 are better managed in a high inflation environment than those in the first 100. 

Of course, it can be said that there is a base effect, but I think that those in the first 100 did not do justice to their height and age.

….

The ratios of 6% (in the top 100 companies with 122% revaluation rate inflation assumption) and 17% (in the second 100 companies with 65% official inflation assumption), which managed to stay above the 7 filters I used, were well managed and used their chances well, show that our companies have difficulties in coping with inflation, and those that were successful could not increase their efficiency and effectiveness. 

Those who have done it have done it, albeit in small numbers. What will those who cannot do so?

We will see who will take responsibility in companies that fail to stay above these filters, and who will make excuses for forces beyond their control.

We will be curious to see how the boards of directors will evaluate and what decisions they will take. 

When you evaluate the financial performance of your company or the company you invest in, I think you can now compare it with this data and have a clearer idea.