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


(Chirag) #1067

I try to stay away from the standalone vs consolidate PE calculation debate.

While ValuePickr members are doing a great job tracking the consolidated PE and it will be an asset in the future, I need to compare current PE with long term historical PE then I have to use the number given by NSE India which is standalone.

Check this article on why sometime we need to stick with an “incorrect” calculation: https://www.washingtonpost.com/news/wonk/wp/2013/09/10/the-dow-jones-industrial-average-is-ridiculous/?utm_term=.105ded55414a

So while they can “fix” the calculation now, they don’t do it as it will not co-relate to the historical data.

For me, the percentage earnings growth is more important than the absolute number of earnings itself.


#1068

At broad level that is fine. But we need to note that consolidated EPS has grown at much higher rate compared to standalone EPS dues to inorganic growth or high growth subsidiaries.


(Chirag) #1069

Agreed. We have consolidated PE for 3rd QTR FY17, so it makes sense to compare the consolidated PE growth YoY and QoQ.


(vaibhav) #1070

You mean EPS, not PE.


#1071

Corrected. Thanks for pointing out.


(PKumar) #1072

Nice article on Global Economy Macro risks - is another 2008 in offerings ?


#1073

Do you mean P/E of 20 - 22 at the consolidated level? Can someone help me with the long-term average of consolidated P/E (point to an earlier post)?


(Bheeshma Sanghani, PhD) #1074

One thing to keep in mind is that growth in an inflationary environment is less valuable than otherwise. We are likely to experience higher inflation so per unit of growth is that much less valuable now than it was earlier in benign conditions.


#1075

I always find Ken Fisher’s perspective practical, refreshing and too often correct.


(josephseby) #1076

Hi
offcourse PE is an output with EPS and Nifty levels inputs. But since we cant get the one input ie. EPS directly from NSE site, what is wrong in reverse calculating it from output and the other input ie. Nifty levels. Am i missing something?
Regards


(Chirag) #1077

As I understand, there is nothing wrong in getting the EPS based on NIFTY PE and NIFTY levels.

But when we use the same NIFTY EPS (that we calculated above) and use it to calculate the NIFTY level when NIFTY PE will be 20; that does not seem right.

Not sure if what I wrote was confusing or clear. @deevee can correct me if I mis-interpreted his words.


(josephseby) #1078

Yes you are right sir, it is not prudent to use the same EPS for future predictions of nifty levels at fair valuations. At least we should consider possibilities of earnings upgradation which has allready started and there is a chance for gaining more steam. The present EPS standalone as per NSE site is 413 which is almost 6% up Qon Q…
Regards


(Amit Jain) #1079

In recent calculations of Nifty levels I have used the upgraded EPS of 413…

The most recent PE value and Nifty closing value give an EPS of 413.

If one wants to calculate based on future EPS, which would be higher by about 10% then that would be alright too. Because it is just a reference point to know when Nifty50 is expensive, normal or cheap.


#1080

The use of EPS could lead to differences due to share issuances, buybacks, etc. These vary systematically with the boom and bust cycles. So, EPS is not the preferred method; although, it can work as an estimate.


#1081

Who is Ken Fisher in this video- the anchor?


#1082

Ken is a self made billionaire and chairman of Fisher investments. He also happens to be son of legendary Phil Fisher

https://www.forbes.com/profile/ken-fisher/


(Deepak Venkatesh) #1083

Hi Chirag

Yes this was my point @josephseby

Rgds


#1085

http://sageoneinvestments.com/wp-content/uploads/2018/01/Indian-Market-Valuation-Analysis-SageOne-Jan-25-18.pdf

Very interesting statistics. If one looks at normalized PE for whole universe and normalized PE for mid/small cap (on page 2 and 3), it is very evident froth is not in Nifty stocks but it is elsewhere.


(phreak) #1086

“Page 27 of 25” - Looks like this is what working extensively with numbers can do to you.


(Tushar) #1088

Isnt this thread pretty simple one? Sell/Caution at higher PE and Buy at lower? I feel whoever wants to invest only at or below PE17 should be the most relaxed people without need of trying to re-assert themselves repeatedly because it is not a question of IF but WHEN. You need to have lot of patience and temperament though for that kind of investing style. Just re-assess your own investing style and stick to it. For bulls, its always case of staying fully invested with coming to cash in some percent(20-50) once it is trading at abnormal PE’s. This is a great thread started by top contributors although I am not able to understand cluttering of this thread in last 1 year(900 out of 1000 messages) though without much knowledge (few exceptions) getting added.