Thanks . Guess will have to read lots more
Hi… can anyone suggest a good site for personal finance… I refer value research online, which is good. Any other suggestions…?
New investors always find a way to go to the online stock market to win profitable success. The first and foremost things are to learn investing basics to easily access a number of sources. Just like taking a new smartphone game with trials, errors, losses and earnings, investing also starts with good information, practice and success route.
As investing in market can be frightening as a beginner, instead, one can learn some basic hot tips or just sit with any trading gurus in order to let them make sell or buy decisions in the market.
Hi , A small question on valuation of banks and finance companies. What price to book value ratio is generally considered as cheap/Expensive for Banks and Micro finance institutions ? Is a micro finance stock trading at less than 2.5 PBV and a Private bank less than P/BV of 3 are considered undervalued ? I know valuation is subjective but still I would like to know what others think on it.
How do I understand or analyze the business model of any company? What are the factors that I should look at for understanding the business model of any company?
Please help me to know more about Debt to Equity and Interest Coverage ratios.
Do we have to emphasize on the “Interest Coverage ratio” while checking the “Debt to Equity”?
Is it a good practice to check the “Interest Coverage” ratio (debt paying capacity) of the company irrespective of the sector where it belongs.
Also, is it relevant to check the Interest Coverage ratio if the company has low or no Debt. Here can we say Interest Coverage ratio value greater than 1 is good?
The Business Model Canvas should be a good place to begin: https://www.alexandercowan.com/business-model-canvas-templates/
The best way is to read a lot of books of conducting business (The Virgin Way, The CRISIL Story, The Outsiders, Straight from the Gut and so on)
Yes. Interest turns calculate the short term capability of the company to meet interest payments.
Yes again (Of course, BFSI should not be included here). Debt holders don’t take pity on the borrower just because they’re in a ‘difficult’ industry (Actually, state-owned banks might actually do that sometimes). However, Interest turns aren’t the only ratios that judge debt repayment capacity. Debt is made up of both interest payments and principal repayment. Interest turns judge the company’s ability to meet interest payments. It’s the simpler D/E Ratio that judges the company’s ability to repay the principal (Make sure to include Contingent Liabilities as well in the numerator).
If the company has low or no debt (I’m assuming <0.5), then yes, it’s a good practice to check interest coverage ratio. However, if a company has limited debt, I’d expect it to have an interest coverage of more than 2-3. If not, it indicates that whatever small amount of debt they’ve taken is costly and reflects badly on the capital allocation decisions of the company.
You have explained it well in minimum words.
For Banks and Finance companies can it be better to use Net Interest Margin, Gross NPA and Net NPA to calculate the debt and write-off loans instead of Debt to Equity and Interest Coverage?
Yes, those ratios should be okay for BFSI firms. I’d also suggest you to monitor their Credit Rating reports.
1)How to check the loan book of a bank in balance sheet?
2)How CASA is calculated ?
for example a bank has 10 accounts and 10 people has deposited 10X100 RS ie total 1k is deposited in banks.
suppose a bank has given 900 rupees as loan ie the CASA of a bank is 90 ? Can any one please educate me
Thanks in Advance:)
Thank you for accepting my request to be a member of this forum. I have a learnt a great deal reading the threads in various forums and have started reading Pat dorsey / Peter Lynch. Still have a long way to go. My question is regarding the ROIC calculation. I am trying to calculate the ROIC value of a company but it doesn’t seem to match with the value mentioned in screener.in. Can any of the esteemed members help me in calculating the ROIC or is it a problem with screener website. Per my understanding,
ROIC= NOPAT/ ( Fixed assets+ working capital)
For instance, I am taking Asian paints
Fixed assets= 2568 crores
Current assets=5500 crores
Short term borrowings=0 crores
Deferred tax liabilities=270 crores
Working capital= 5500-3398+270=2372
But the screener shows 58%
The great thing about Screener is that you can view how everything is calculated once you download the excel file.
Here’s what Screener is using to calculate Asian Paint’s Return on Capital Employed as on 2018:
Operating Profit = Rs. 2923.26 Cr
Depreciation = Rs. 311.11 Cr
Tax = Rs. 917.03 Cr
Fixed Assets = Rs. 2568.53 Cr
Working Capital (Other Assets - Other Liabilities) = Rs. 1271.74 Cr
The final calculation done by Screener is as follows:
(2923.23-311.11-917.03)/(2568.33+1271.71) = 43% (As on 2018)
You can see this specific formula in Cell K24 of the ‘Balance Sheet’ sheet.
Incidentally, queries specific to Screener can be posted in this thread:
You’ve already understood it perfectly. Valuation is subjective and Ratios are simply guidelines. For BFSI frms, I would suggest that you use a Dividend Discount Model for valuation.
Our own @Yogesh_s has created one:
Obviously there’s no “acceptable” P/B. Gruh Finance trades at a staggering 16+ P/B Ratio and PNB trades at 0.63 P/B. That may or may not make them overvalued or undervalued right off the bat. You’ll have it value them at the sum of Discounted Dividends in order to find out.
Where is the option to download the XLS, is this only available on Desktop site?
GRUH is trading at 16+ p/b because it have good record of RoE, RoCE and Dividend.
Please correct me if wrong.
This is the last post in which a link to the model has been shared. I’m assuming it works:
I don’t know. And I try my best not to reason with the market.
I just wanted to say, some companies trade at higher valuations than peers because of good fundamentals and trust.
Hello all The basic idea of value investing is to buy rupee worth of asset at less than rupee say 60 paise.but how can you know correct intrinsic value of company?is it from past profits?or balance sheet?my another doubt about growth investing is in 2000 ITwas growing it busted in 2008 infra was growing and busted and now nbfcsconsumption themes are growing how can we value high growth companies?and how can we know how far growth will be there.real growth will be tested in times of bad Economy conditions?
//but how can you know correct intrinsic value of company?//
you donot. you can arrive at a certain figure using various valuation techniques. but these figures will differ and hence only time will tell which is a correct one.
the underlying assumptions will change the outputs too.
there are no evergreen sectors… each rise and fall with times and prevailing economic conditions.
in todays fast changing times, it would be too difficult to gauge or predict what happens say even next year…
so, the idea would be to invest in good cos and track the developments… any development that deviates from your storyline demands that you review your position.
When to use P/E ratio and when to use Price to Book while analysing NBFCs?
Is it a correct approach to ignore the P/B when company paying the Dividend regularly?
What is the link of above two ratios with respect to RoE? Specially if a company is generating a good RoE (e.g > 25) and healty NIM and low GPA/NPA?
Can someone help in identifying above?