Investing Basics - Feel free to ask the most basic questions

@maddyj88

The management is saying in future the revenues will grow faster than depreciation. May be yes, but that is in the future. As of today, the free cash flows are not really free until you reduce them with mandatory lease payments:

So deduct that too from CFO (besides normal capex) if you want to see what today’s real free cash flows are.

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Interesting! So they are capitalising lease. The amount is significant in the balance sheet 1000 Crs +. From the annual report have not been able to understand what it is, i.e are they lease rent paid in advance or capitalising the lease paid for accounting period? If they are capitalising the lease paid during the accounting period, then its a red flag for me! Not sure I’m missing something!

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On a day where there was net buying between FII and DII’s, how come >90% of individual stocks across large, mid and small caps go down?
What was being bought?

PS: I am more of a technical investor, managed to sell >25% of PF before this correction

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@Worldlywiseinvestors Sir I saw company in which PE was very high i.e 120 but after earning came PE decreased to 30-40.

So my point is that how to evaluate such a company whose PE is so high?

Note: Company made almost 4x return from 120 PE and It was hospital industry.

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Simple u have to see the earing growth in future and past .then u will get the forward PE.

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Pe can’t be looked at in isolation. It should always be looked with the E trajectory.

Example: Varun beverages, starting Pe was 60 times when I looked at it. Post results it fell to 48x. Ttm multiples should only be looked at with your view on the E growth.

Sometimes there are one offs like impairment which impact the Earnings part temporarily. You have to normalise for that too.

On the other hand, sometimes there could be steep jump in earnings due to capex commercialising. Deepak nitrites Pe went to 70x +. Post phenol capex it fell to 10x.

Pe is useless if one doesn’t have a view on earnings

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How do you pick stocks for SIP and frequency of the SIP?

Someone introduced me to the concept of SIP in stocks and now I think i can beat index funds by this method. I saw a number of posts about investors saying that they accumulate a particular stock via SIP. How do you pick the stocks for SIP? I am sure there are a number of ways.

Once picked, how do you decide if the SIP should be weekly/monthly/bi-monthly? Lets discuss!

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Hello all,
I have a question. Why is HUL’s RoE dropping quite significantly.
image
Screenshot from screener.in

Thanks

Due to increase in average shareholders’ equity and Low Growth Rate

Hi,
How to calculate bargain price for a company in current scenario?

Are platform business demands higher valuation? if yes, then why?

Platform companies are indeed valuable and generally get a higher valuation. Because of

  1. Network effects - the platform’s value increases as more users and producers join. This positive feedback loop can lead to exponential growth
  2. Scalability - Platforms are often highly scalable since they can grow linearly without increasing costs linearly. This means more capital can be put to work for higher returns
  3. Data analytics - Vast amounts of data generated by platforms can be leveraged for insights, personalization, and targeted advertising.
  4. Ecosystem value - Platforms often create ecosystems for third-party developers, partners, and users that contribute to the platform’s growth.
  5. Diversified revenue streams - They often have multiple revenue streams like transaction fees, subscriptions, advertising, etc. that lead to better margins and demand higher valuations.

The outcome of the above factors leads to the development of a moat around the business, that offers higher visibility and certainty of growth for a longer duration for which investors are willing to pay a premium.

Hope this helps.

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Example of platform companies

The main reason for high valuation is high degree of operating leverage platform businesses tend to enjoy. These businesses tend to have very low marginal cost of production and a very healthy balance sheet due to minimal growth capital required and very short cash conversion cycles. All of this means that the percentage of accounting profit getting converted into free cash flows tends to be very high for a platform business. For example, most of the platform businesses (e.g. CDSL, BSE etc) have their sales/free cash flows ratio in lower single digit.

I also believe one shouldn’t look at price/earning (accounting profits, not real cash) in isolation while valuing a platform business. DCF discounts future cash flows (not accounting profits) and for platform businesses, cash flows tend to have much more robustness and predictability than an asset intensive business that require continuous infusion of CAPEX for revenue growth. And if your platform business happens to be in a fast growing sector, terminal value can also increase dramatically, resulting in higher present value of the business.

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As far as I know, Platform businesses like CDSL, CAMS and BSE have high OPM and while doing valuations for such business we can look at the Price To Sales ratio. For businesses having high OPM(30+) their Price To Sales ratio is higher i.e 13-16 as compared to businesses having low OPM. We can look at historical Price To Sales numbers to understand whether the business is trading at higher or lower Price To Sales ratio.

Could someone explain why the NTPC N-7 bond is trading at 5.04 when the face value is 10?

Looking for any existing solution which arrange company management including directors across the years - in simple term private LinkedIn generated from Annual report data. My requirement is to build known legal case for a company in different time able to map it to people involved in the timeline.

In case if there is no solution available any one is maintained it already which I can study?

Good idea, research report by fund houses typically cover that aspect, idea will be useful for undiscovered companies.

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How to fillter stocks which are achieve their lifetime high
or
Stock which are trading 5 year high on the basis of prize.
How to make screen?

Check chartink.com and see if you can do this.