Nifty PE after all earnings have been declared


(vinloop) #21

@diffsoft Hi, can you please post the update for Q3 results? Many thanks.


(Krishnaraj) #22

Whoa! Am I glad someone’s asking for this :slight_smile:

Coal India, L and T and Tata Power are yet to declare their results. Coal India is the last one and I think we should have it by Nov 30.

Thanks and let me kniw if you don’t see it by then.

Cheers,


(Krishnaraj) #23

Coal India results will be out on Dec 13, will put this up on that day.

Thank you.

Warm regards,


(Krishnaraj) #24

Folks,

Attached is the Nifty trailing PE (weighted) after results of all firms have been declared. As of closing yesterday Nifty PE was 19.15.

Nifty PE Q2 FY17 for valupickr.xlsx (31.8 KB)

The TTM profits have improved by 2.5% in the Sept 2016 quarter vs the June 2016 quarter.

Feel free to ask any queries.

Warm regards,


(vinloop) #25

Hi @diffsoft,

would you please publish the latest sheet for Q3?

Many thanks.


(Krishnaraj) #26

Ambuja Cements, a Nifty constituent, will publish its results on Feb 20 and will be the last one to announce results. Soon after it’s done I will publish it on Feb 20.

Warm regards,


(Krishnaraj) #27

Folks,

Attached is the Nifty trailing PE (weighted) after results of all firms have been declared. As of closing on Feb 20, 2017 the Nifty PE was 20.80.

Nifty PE Q3 FY17 for valupickr.xlsx (39.6 KB)

The TTM profits have decreased on a weighted basis by 0.2% in the Dec 2016 quarter vs the Sept 2016 quarter.

Feel free to ask any queries.

Warm regards,


(vinoths) #28

Thanks Krishnaraj. Please validate my query below and let me know if i am missing anything

Is revised PE and calculations are correct? Because, if you look at the numbers from NSE it is still above 23.19 as on 20th Feb 2017

Regards,
Vinoth


(Rupesh Tatiya) #29

NSE uses standalone earning number & hence PE comes out to be higher. As pointed out before on this thread, consolidated earnings should be used & hence PE turns out to be lower.


(vinoths) #30

Ok thanks for the clarification


(Krishnaraj) #31

@rupeshtatiya is correct

I also wish to share a common fallacy in using daily PE data from where ever you may source them:

Any company does business every day and hence theoretically has earnings everyday; but these results and hence earnings are reported only once in a quarter. However prices are reported every day. As a result whenever we look at PE ratio we are looking at prices today in relation to earnings in the past. However we mentally assume that the PE is current. The gap between earnings today and earnings used in PE widens as the days go by in a quarter. For instance if I look at TTM PE as on March 31, 2017, I am using price on March 31, 2017 with TTM earnings, 3 months ago , i.e. Jan 2016 - Dec 2016 earnings. And this will continue till such time the company declares its March quarter results, which may well be in April, thus older by another month.

Worse, soon after the results are declared, the computed PE ratio could disproportionately jump or fall if price remains the same as just before earnings were declared; and the earnings for the March quarter were widely different from March quarter last year. So if EPS say jumps 25% in JFM 17 vs JFM 16, then for the same price the PE ratio will drop by (1/1.06) - say from 15 to 14.15, optically making the stock appear much cheaper, when in fact it isn’t so.

This may lead to erroneous conclusion and potentially wrong decisions if purely quantitative techniques based on PE ratio are applied for buying or selling stocks.


(vinloop) #32

@diffsoft will you plz publish the report post CIL numbers today or still expecting some more results.

Many thanks.


(Rupesh Tatiya) #33

Hi Krishnaraj,

You bring home an excellent point. Although P/E ratio will vary daily due to varying prices, shall we compute Nifty 50 EPS and use that number to compute P/E ratio in our minds?

Eventually the goal of computing P/E ratio for index to figure out which part of pendulum swing we are in as HM would say. Whether we are moving towards extreme of bubble or we are in the middle or we are moving towards other extreme.

Regards,
Rupesh


(Krishnaraj) #34

This time Hindalco is the last guy in Nifty to declare results; and it will do so tomorrow. And many Nifty firms (Aurobindo, BPCL, CIL, L&T and NTPC) are declaring results today.

I will be able to publish it on May 31.

Separately I also intend to show the effect of change in the Nifty constituents, on Nifty EPS. Nifty constituents were changed with effect from March 31, 2017. BHEL and Idea Cellular were removed and Indian Oil Corporation and Indiabulls Housing Finance were added. (Source: Changes to Nifty with effect from March 31, 2017).

The former were faring poorly and the latter are on the ascendant. Now when a change is made on the last day of the quarter, we should actually be computing the earnings based on the as-yet-unchanged Nifty till March 30, 2017 and add a day’s earnings with the changed Nifty for March 31, 2017. Knowing the latter will not make too much of a difference, we should practically be taking the old Nifty’s earnings as earnings for the quarter.

But no one does that; because of their own motivations. One clear motivation is to show higher earnings for the Nifty, which will be achieved by replacing firms with falling earnings with rising ones. The older Nifty will show poorer earnings growth compared to the newer Nifty; but if we are not careful in discounting this we will think that Nifty earnings have grown much better than they actually have. Sometimes I wonder if that’s the motivation for NSE itself to make the change from March 31, 2017, instead of April 01, 2017. The exact impact will be known after I compute them all tomorrow.[quote=“rupeshtatiya, post:33, topic:5568”]
You bring home an excellent point. Although P/E ratio will vary daily due to varying prices, shall we compute Nifty 50 EPS and use that number to compute P/E ratio in our minds?
[/quote]

Computing Nifty EPS requires making additional assumptions. We know Nifty is say 9,500 or so but may not know how many fractional shares for each constituent. We can make some rough approximations, but I did not want to trade accuracy for that. Actually it should be easily available with someone who has a Bloomberg Terminal.

Warm regards,


(Krishnaraj) #35

Folks,

Attached is the Nifty trailing PE (weighted) after results of all firms have been declared.

Notes:

  1. As of May 29 the Nifty trailing PE was 22.18 vs 20.80 as on Feb 20. Again valuations have grown faster than earnings. Same time last year the PE ratio was 19.81. Nifty PE FY17 for valupickr.xlsx (56.6 KB)

  2. FY 17 PAT over FY 16 on a weighted basis grew 4.6% and on a q-o-q weighted basis grew by 7.1%.

  3. I had also argued that earnings growth of Nifty is partly due to changing Nifty constituents with the benefit of hindsight (this is much like evaluating a school performance by measuring a two term average of 50 chosen students from 500; changing the composition of this 50, based on their marks in the first term; and measuring the performance of this new 50 after both the terms). If we keep the Nifty constituents as what it was end of Q3, weighted earnings growth slips to 3.6%. You may see the unchanged Nifty sheet by unhiding the above workbook.

  4. Finally, a Nifty constituent was again changed with effect from May 26, 2017, so strictly speaking there will be a change in Nifty PE from what I shared,. This will get reflected from next quarter since we do not yet know the weights (and the earnings will also lift because of the same reason I cited in 3 above)

Feel free to ask any queries.

Warm regards,


(Yogesh Sane) #36

For SBI, wouldn’t it be appropriate to take standalone results vs consolidated? Consolidated results include results of all the regional SBIs (and all their NPAs and provisions for those) that were merged with parent in FY17?. SBI being an index heavyweight, has an impact on the aggregate numbers.
SBI’s results for FY 2017 do not reflect the economics of its underlying business which has improved based on standalone numbers.


(Krishnaraj) #37

No. I had written about it earlier. If they had been merged then consideration would have been paid and ultimately the shareholders gets the fruits (good and bad) of the controlled entities as well. Also some of the relevant ones are getting merged from April 01, 2017. (note 13 in this file - SBI Q4 FY 17)


(Uday) #38

Hi Krishnaraj

I keep following this thread every quarter to see the nifty p/e trend. Thanks for the good work. Can you please post the nifty p/e excel for this quarter once all the nifty companies report their numbers.

Best Regards
Uday


(Krishnaraj) #39

There are many firms yet to report their earnings, soon after they do it (should be by August 15), I will compute and put it up.

Glad to know that you find it useful!

Warm regards,


(Krishnaraj) #40

Folks,

Attached is the Nifty trailing PE (weighted) for quarter ending June 2017 after results of all firms have been declared. Nifty PE Q1 FY18 for valupickr.xlsx (67.0 KB)

Notes:

  1. The Nifty trailing PE as of 14/08/2017 was 22.83 vs 22.69 as on 29/05/2017. Thus valuations have grown slightly more than earnings growth. About the same time last year the PE ratio was 20.09 which means valuations grew 13.6% faster than earnings.

  2. For the quarter ending June 2017 unweighted PAT grew by 60 basis points, but weighted PAT grew by 10%. This implies that high weighted stocks performed better (aka HDFC Bank, RIL) than low weighted stocks.

  3. For the trailing 12 months ending June 2017, weighted PAT grew 1.64% over trailing 12 months ending March 2017.

Feel free to ask any queries.

Warm regards,

P.S: I do not know how to get the digit separator comma to after 3 digits, instead of after 2 in Excel, which makes it a bit difficult to read numbers in millions. Would appreciate any help.


Nifty PE crosses 24|A statistically informed entry-exit model!