Points to be analyzed before picking a Stock (Experts kindly contribute)

RichDad

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Here are some points I analyze before entering a stock. Experts we appreciate your valuable input.

1. EPS - Y on Y/Q on Q growth
2. PE Ratio
3. ROE
4. NAV/P
5. Positive Working capital
6. Gearing (long term debt and equity)
7. Future earnings poteitial (future plans)
8. Other investments of the company
9. Top 20 shareholders
10. Management and the director board
11. Personality of the stock (Technical analysis - Trend Chart)

Could someone please guide me about the PE ratio and NAV/P? Are there PE and NAV/P standards for different sectors?

How to calculate whether the stock is currently under/over valued?

Many thanks!
Cheers!

Antonym

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@ImeshA: You are on the right track; keep it up! Smile

I have a simple elimination thumb-rule to check whether a share is currently under- or over-valued. Irrespective of the sector, I calculate value of the share as:
NAV per share + 8 X Annual EPS
If the market price is more than this, I would not consider buying it.

It's crude and does not consider the many factors that you analyze. But, as a method of elimination, it works for me.

Soundchips

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ImeshA wrote:Here are some points I analyze before entering a stock. Experts we appreciate your valuable input.

1. EPS - Y on Y/Q on Q growth
2. PE Ratio
3. ROE
4. NAV/P
5. Positive Working capital
6. Gearing (long term debt and equity)
7. Future earnings poteitial (future plans)
8. Other investments of the company
9. Top 20 shareholders
10. Management and the director board
11. Personality of the stock (Technical analysis - Trend Chart)

Could someone please guide me about the PE ratio and NAV/P? Are there PE and NAV/P standards for different sectors?

How to calculate whether the stock is currently under/over valued?

Many thanks!
Cheers!

When the market starts growing mainly...based on corporate earnings sustainable growth can be seen. I think CSE is gradually turning towards fundamentals again...

First of all CSE need to attract medium term investors, it is important to preserve and maitain those values as well.

Last edited by Soundchips on Tue Jun 14, 2011 8:58 am; edited 1 time in total

Soundchips

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Antonym wrote:@ImeshA: You are on the right track; keep it up!

I have a simple elimination thumb-rule to check whether a share is currently under- or over-valued. Irrespective of the sector, I calculate value of the share as:
NAV per share + 8 X Annual EPS
If the market price is more than this, I would not consider buying it.

It's crude and does not consider the many factors that you analyze. But, as a method of elimination, it works for me.

Thanks , I think it is the time to concentrate on the CSE, there are so many attractive counters.

Soundchips

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It is important to preserve the integrity, good reputation, and fundamental values of a stock exchange to see a sustainable growth. Long term investments, investor confidence etc. etc.

seyon

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ImeshA wrote:Here are some points I analyze before entering a stock. Experts we appreciate your valuable input.

1. EPS - Y on Y/Q on Q growth
2. PE Ratio
3. ROE
4. NAV/P
5. Positive Working capital
6. Gearing (long term debt and equity)
7. Future earnings poteitial (future plans)
8. Other investments of the company
9. Top 20 shareholders
10. Management and the director board
11. Personality of the stock (Technical analysis - Trend Chart)

Could someone please guide me about the PE ratio and NAV/P? Are there PE and NAV/P standards for different sectors?

How to calculate whether the stock is currently under/over valued?

Many thanks!
Cheers!

Yes ur measures would be useful for the medium and long term counter, Yes based on ur measures the particular stock is undervalued and attractive in terms business growth. Definitely u will win investing the stock. However in the present mkt condition rather than these factor, u have to study the behavior of the investors and stock personality.

Soundchips

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I think those behavior based temporary growth does not last long. real growth based on corporate eanings may sustain.

chamarahs

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Soundchips

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Change of behavior may help see a sustainable growth... need to attract real investors.

Capt

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"In CSE if these figures are not healthy and if you think the company doesn't have bright future you can buy it without any fear Evil or Very Mad

It will move up or pushed up.
But if the company is performing well you should think twice before investing your hard earned money."

I think this is the mindset of most of the retailers now... Crying or Very sad

RichDad

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Dear friends,

Thanks a lot for your input. Appreciate it.

Thanks Antonym. Your method sounds interesting and simple. I worked it out for FLCH

NAV/P + 8 * Annual EPS
4.60 + 8 * 0.46
8.28

Please correct me if I'm wrong.

Soundchips I too long to see this change in CSE which will lead to a steady future.

seyon you bring out a valuable point. If we are in Rome better be Romans. True enough. I think a percentage of the total investment should be allocated to this type of trades as well.

Capt this is the prevailing situ and i think it's time investors change this mindset themselves or the regulators take some action to save the hard earned money of the blindly following retailers.

I'm a new member to this forum and it's very nice to meet you all.

Thank you
Good luck!

Antonym

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@ImeshA: If your NAV & EPS figures are correct, the calculation is right and FLCH looks very attractive at any price below Rs 5.

As you can see from my NAV per share + 8 X Annual EPS formula, I like companies whose price is supported by something solid (net assets), in addition to good future earnings (EPS).

Try it on the other shares that you own, to find out which ones are overvalued and which are undervalued. If you find any that are trading at less than 60% of formula value, do let me know...

In the meantime, let me check on FLCH... Smile

Monster

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Antonym wrote:@ImeshA: If your NAV & EPS figures are correct, the calculation is right and FLCH looks very attractive at any price below Rs 5.

As you can see from my NAV per share + 8 X Annual EPS formula, I like companies whose price is supported by something solid (net assets), in addition to good future earnings (EPS).

Try it on the other shares that you own, to find out which ones are overvalued and which are undervalued. If you find any that are trading at less than 60% of formula value, do let me know...

In the meantime, let me check on FLCH...

@Antonym, What's your opinion on CIT and CFI. These two counters looks good for long term investment as they hold attractive investments under their portfolio. BTW I was following your comments on RENU, which let me to dig further into detail.

ps: Currently I am holding RENU and CIT as my long term investments

Antonym

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Monster wrote:
@Antonym, What's your opinion on CIT and CFI. These two counters looks good for long term investment as they hold attractive investments under their portfolio. BTW I was following your comments on RENU, which let me to dig further into detail.

ps: Currently I am holding RENU and CIT as my long term investments

@Monster: I haven't analyzed CIT and CFI yet. Give me a day or two to go through their financials... In the meantime, why don't you share your findings? Are CIT and CFI also trading at less than what their investments are worth? (Let's start another topic.)

gann

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Antonym wrote:@ImeshA: If your NAV & EPS figures are correct, the calculation is right and FLCH looks very attractive at any price below Rs 5.

As you can see from my NAV per share + 8 X Annual EPS formula, I like companies whose price is supported by something solid (net assets), in addition to good future earnings (EPS).
In the meantime, let me check on FLCH...

\
NAVPS = 4.6
EPS = .46
So in your analysis FLCH is worth 4.6+8 * .46=8.30

Antonym

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gann wrote:

Antonym wrote:@ImeshA: If your NAV & EPS figures are correct, the calculation is right and FLCH looks very attractive at any price below Rs 5.

As you can see from my NAV per share + 8 X Annual EPS formula, I like companies whose price is supported by something solid (net assets), in addition to good future earnings (EPS).
In the meantime, let me check on FLCH...

NAVPS = 4.6
EPS = .46
So in your analysis FLCH is worth 4.6+8 * .46=8.30

@gann: Yes, that's just a indicative figure. And if it is trading at less than 60% of what it's worth, it's a great deal - in my opinion. Of course, one must check all other aspects that ImeshA has referred to at the beginning of this post.

Slstock

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Antonym wrote:@ImeshA: You are on the right track; keep it up!

I have a simple elimination thumb-rule to check whether a share is currently under- or over-valued. Irrespective of the sector, I calculate value of the share as:
NAV per share + 8 X Annual EPS
If the market price is more than this, I would not consider buying it.

It's crude and does not consider the many factors that you analyze. But, as a method of elimination, it works for me.

Interesting formula Antonym. Need to test on some of mine.

xhora

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the only one i have seen apart from FLCH that satisfy Antonym's formula is
Light House Hotel (LHL)

1.31*8 + 50.63 = 61.11 current 59.4 Very Happy

Antonym

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xhora wrote:the only one i have seen apart from FLCH that satisfy Antonym's formula is
Light House Hotel (LHL)

1.31*8 + 50.63 = 61.11 current 59.4

@xhora: Maybe the only one in your portfolio... You obviously haven't looked hard enough; there are plenty more... It's treasure hunt time! Smile

xhora

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Antonym wrote:

xhora wrote:the only one i have seen apart from FLCH that satisfy Antonym's formula is
Light House Hotel (LHL)

1.31*8 + 50.63 = 61.11 current 59.4

@xhora: Maybe the only one in your portfolio... You obviously haven't looked hard enough; there are plenty more... It's treasure hunt time!

I don't have a single LHL with me just came across this when doing some research into hotel sector. I knew about ur formula since you have commented abt it on a early post. Since then I'm also using this to value every share I'm looking into.

actually i modified it a bit. Since PE of 8 cannot be justifiable for every sector i'm using

NAVPS X 50% + Sector PE X EPS X 50% + Operating Cashflow/Share

According to that many are undervalued Smile

smallville

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Good point antonym.. make sense.. After all u discount it well in advance so u buy only the spirit Wink

Now I did the calculation for KGAL on this basis;

NAV = 96.38, EPS = 33.66
SO NAV = 8* EPS = 99.38+ 268.8

And the total is - 365.66/-
Current Share price range - 200-208

Even if we take discounted sector EPS as 7 for cyclicality, this looks valued 33.6*7 = 252/- to me.

Ok now u got one from methods mine & urs Wink

Monster

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Antonym wrote:

Monster wrote:
@Antonym, What's your opinion on CIT and CFI. These two counters looks good for long term investment as they hold attractive investments under their portfolio. BTW I was following your comments on RENU, which let me to dig further into detail.

ps: Currently I am holding RENU and CIT as my long term investments

@Monster: I haven't analyzed CIT and CFI yet. Give me a day or two to go through their financials... In the meantime, why don't you share your findings? Are CIT and CFI also trading at less than what their investments are worth? (Let's start another topic.)

As of 4Q2011, quoted investment of CIT, it's worth Rs 3,125,755,937/=. So, only quoted investment worth Rs 568/- per share.

As of 4Q2011, quoted investment of CFI, it's worth Rs 2,707,952,215/=. So, only quoted investment worth Rs 541/- per share.

I am waiting till the annual report to dig more in to detail. Yes, correct. These two shares never discussed in this forum. We should have separate topic to discuss.

ps: Please don't consider this as a promotion. Personally I don't recommend or promote any share. I have only few hundred shares of CIT. But I am slowly collecting. I don't have a single share of CFI.

Slstock

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slstock wrote:

Antonym wrote:@ImeshA: You are on the right track; keep it up!

I have a simple elimination thumb-rule to check whether a share is currently under- or over-valued. Irrespective of the sector, I calculate value of the share as:
NAV per share + 8 X Annual EPS
If the market price is more than this, I would not consider buying it.

It's crude and does not consider the many factors that you analyze. But, as a method of elimination, it works for me.

Interesting formula Antonym. Need to test on some of mine.

I don't own all of the below shares .. but spent some time on this on sake of personal interest and benifit for others to compare

*DIMO marginally fits your bill.
NAV 482
EPS 243

Value = 482+243*8=2462.

60% of it is = Rs 1455 ( trading closer to that now).

* HAYC does marginally. DFCC, DIST with capital gains,

* CSEC,CFVF, COCO,RHL, CTLD,OSEA
* Well there will a bunch of plantation share that will fit in ( KGAL SmallVille already mentioned, MAL,BALA, MASK etc)

there are more..

Soundchips

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On this basis... RICH NTB GUAR KGAL at current prices are very attractive !

Intrinsic

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Antonym wrote:@ImeshA: You are on the right track; keep it up!

I have a simple elimination thumb-rule to check whether a share is currently under- or over-valued. Irrespective of the sector, I calculate value of the share as:
NAV per share + 8 X Annual EPS
If the market price is more than this, I would not consider buying it.

It's crude and does not consider the many factors that you analyze. But, as a method of elimination, it works for me.

Dear Antonym,

Your rule of thumb really works ! + rep from me.

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Points to be analyzed before picking a Stock (Experts kindly contribute)

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