Hi @kb_snn @thecroc @dumboinvestor
Copied the above from your posts on page. Did not want to clutter that thread but had a question so I thought I will post it in a thread where we are discussing the carnage and thoughts going forward. I found that part of the conversation interesting so I mapped it to inflation.
This is just a quick run on my running a simple test. If you guys or our other members have some knowledge to share it would be wonderful.
So, we know and have discussed before that returns we can expect from a business are a mix of growth in earnings and growth in inflation. FMCG companies are a good proxy of the Indian growth and inflation story.
Please find below the data I gathered; example below is HUL.
So I can see (my view, I would like to learn here) that a company like HUL has in the last 10 years grown it’s earnings at 9.54 percent. But then I see that inflation has probably been a cause of 8% of that. So real growth is nominal.
Then I can also see that inflation is now very controlled. So is the growth in earnings real once we take out inflation?
Also, what are the implications for investors who are paying high prices. Are they hoping inflation will become high again? Is that going to drive returns?
What are the reasons for these high valuations?
Are analysts missing their estimate for the last 3 years because they have not been mapping it to earnings growth but hope of continuing inflation growth?
Is everyone on Kool-Aid?
Yours humbly.