Investing Basics - Feel free to ask the most basic questions

What do you mean very recent?

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Hello Everyone,

I am trying to research a company with a future growth opportunity although the company has not given good profit in the last 2 years. But now they solved their past burdens and recently posted some profit. Its PE is 0 currently. so how can I give a valuation to this business?

If not PE then what are some other metrics to look at while considering earnings in mind.

thanks

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If earnings are depressed / miniscule, PE should be very high. Not sure how PE is 0. PE being zero is possible only when price is 0 in which case there isn’t much point researching this stock.

But if the earnings are depressed for some reason (possibly interest costs which you mention has been cleared recently), work out estimated earnings in stable state once the business turnaround improves. See what PE that would work out to based on today’s price. Does that sound reasonable compared to its peers?

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Consider using Price-to-Sales (P/S) ratio, Enterprise Value to Sales (EV/S) ratio, and Discounted Cash Flow (DCF) analysis to value the company since its PE ratio is not applicable.

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Good profit

May the best way to start analysis is why the company failed to generate substantial break even profit? What component in their business caused the an unprofitable endaveour ? What was the challenge ?

past burdens

How did company solved their Debt issue? Look at cash flows. Is company not able do business with efficiency? Look at cash convesion cycle. Is margins are the issue? Is business facing sector headwinds or poor management ?

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I have question about this website.

  1. Is there a mobile app for this ?
  2. Is there a main Page forum for Kaynes Technology ? I cant find it.
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  1. No app, only website.

  2. No thread exists for Kaynes.

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Hi,

I had a few questions wrt related party transactions for a company’s RHP I was going through.

  1. Here, does loan accepted means that the company has accepted a loan from related party or the company has given a loan to related party?
  2. What is the significance of negative opening balance, does it mean the company owes money to related party or vice versa?
  3. Also, is the interest expense applicable on Closing balance or Opening balance + Loan accepted?

I can build it. Please DM me.

Hi, Based on the limited information that has been shared it appears as follows:

Loan accepted means company has taken a loan from the related party

No, it means company has paid more to the related party who now owes it the money. See for Hiren Kotecha - Loan repaid = 0.72 which is the Closing balance for 21-22 which is also the opening balance for 22-23. So it seems it means company has paid him 0.72 which he now owes to the company

Interest expense will be on the entire loan exposure for the tenure of the loan. You cannot get the interest calculation from the given information since the dates of the loan taken / repaid etc are not available.

Overall, the following formula should hold for the numbers given:
Opening Balance + Loan Accepted - Loan Repaid + Interest Expense = Closing Balance
If it doesn’t seek an explanation from the company.

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Sir, management analysis ke liya kaun kaun se source use kre.
Kuki kisi kisi company ke MD ke bare may bahut less details diya hota hai.
Google pe linkindin pe bhi available hai. To kaun sa source use kre.

You may wish to find same answer in valuepickr search, you will find it, but in english. Replied it earlier.
For others also please you may follow the procedure.

Management analysis is indeed one of the most difficult part of company research. It comes only with experience, and even experts go wrong many a times. For starters, go through the article given below.

How to do Management Analysis of Companies - Dr Vijay Malik

In general, to assess management quality you need to look at management’s actions (ACTIONS – not words) over a long period of time, and arrive at a judgement. Look at what the management has done, and not done over the years.

A simple way is to take the latest Annual Report and compare it with the Annual Report 10 years ago. Compare parameters such as number of products, product lines, number of plants, manufacturing capacity, dealer / distributor network, geographical reach etc. If the management is dynamic and competent, you should see good growth in these things over the years. Also look at what the management has NOT DONEabsence of frequent equity dilutions, unrelated diversifications, debt write offs, large M & As etc. are all positives and their presence is a negative (or risk).

Finally, you can never be sure about what the management will do next. Remember you are only trying to reduce the chances of a mistake and increase the odds of good decisions.

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