Standalone or consolidated. Which one to consider?

Can some one please tell me whether to consider standalone or consolidated financial statements while analysing stocks? Both are tend to be very different like eps, book value etc vary greatly. If both are to be looked at what should be the weightage? It'd be awesome if someone explains with example. Thanks a lot!

Focus on the consolidated statements.

consolidated = report of whole group of companies,

standalone = only one parent company, excluding subsidiaries.

@Einstein thanks, but i know that. I want to know which is more important and the weightage of the two

you have to be flexible here because you cannot rely on just one, few months back I use to concentrate only on consolidate balancesheet, but then i meet tata steel, their standalone networth is of about 55,209.68. but if you include all the subsidiaries(corus etc etc) of all the subsidiaries then you'll get consolidated net worth of 34,193.45.. sudden drop in networth
(from here different analysts can have different conclusion so let stop here, by the way its because of their aggressive loans and bonds which they are selling to support their business).

what if tata steel don't have much of the big subsidiaries like corus etc.. in that case we can just do our analysis on standalone balancesheet. then no need to look at them.

another example for standalone and consolidated is sun pharma, if you take a look at their consolidated balancesheet you'll find their total inventories(raw material, machines etc) is of worth 2577 crores, where as standalone its only worth 868 crores, this tells us that sun pharma's subsidiary companies are producing finished goods for the company.

add: if company is selling their subsidiary company which hold their invent roes, could means that company might not be able to produce as much sales as it was before.. then you know where NOT to invest..

back to your question on which is more important, both are. just depends on the company, as a beginner just concentrate on consolidated one. but always use common sense for better analysis.

@Einstein you might want to be bit careful when you look at any Tata company, various Tata companies hold stakes in other Tata companies so if you are trying to value those it might be difficult. I understand we are just discussing the financial statements.

If you are interested you might want to read a piece about it by Prof. Damodaran who was invited to Tata leadership summit sometime ago.

If a company is selling its subs then you need to look out for the reason despite of the fact that sub might have better growth opportunity/market share or even it could be a cash cow.

Reasons could be numerous for e.g.
1. Focusing on core business
2. Cash requirement might be higher for subs
3. Tax incentive using NOLs
4. Company might fetch a higher valuation by carving out sub

Thanks for the info on Mr Damodaran, will surely look for it in future.

by the way, im looking for some investment opportunities post quantitative tampering. other analyst are expecting rupee to go beyond 65-70 range if that happens peoples will invest in IT which is already slightly over valued. from last 1 month im looking for some boring companies and got 1, BHEL.

India is importing infrastructure equipment from other countries, if the price goes up, we have to look for some domestic options and BHEL and LT. bhel is trading at 60% discount to its intrensic value, and if indian companies start buying domestic engineering equipments post Quantitative easing, i think bhel can be a multi bagger, what do you say??

I will def take a look at the BHEL and LT-IN, however, if exchange rate movement impacts these two companies then I believe regression of BHEL/LT-IN over $INR should reflect that.

Always use consolidated reports. Standalone are of no worth to conservative investors. The stand alone is always worth a glance for mishappenings.

@ Einstein and G is there any way to find which subsidiaries have contributed how much in the consolidated statements? so to get a better idea of which are more important among the subsidiaries