How exactly is forward P/E Calculated. I used to think it’s predicted EPS for 1 year/current price, but the forward P/E given in this article seems very strange
At its current one-year forward, the Nifty 50 trades at a price earnings or PE multiple of 18.38, according to Bloomberg estimates
This article was written back when the Nifty regular P/E was 29. How can regular P/E be 29 & forward P/E be 18? That would mean an expected growth in EPS of 60% in 1 year. How is that even possible?
Also, where can I find current forward P/E for nifty
Many reputed well established companies dont do investor conference call nor have investor presentation on the website. Although not legally necessary , isnt such a thing a basic requirement for ethical companies? How does one find out more about such companies? I guess These present to institutional investors only as one sees nse notification that such companies meet so and so securities . Why is there such discrimination between institutional investor and retail investor ? In such case what the way out ? How does one find more information? Atleast companies who do concall publish transcript but these dont do concall. @basumallick dada , @hitesh2710 Hitesh bhai , request your suggestion pls .
As long as there is no legal or policy requirement, there is nothing possible. For example, a company I really like is Divi’s Lab. They do not interact with the public shareholders or analysts at all other than in AGMs. Sometimes, I have seen some brokerage reports from prominent brokers, so it is possible they give selective access. There is nothing much that can be done about it.
We need to learn about such businesses by doing our own scuttlebutt and talking to dealers, suppliers, employees etc. A platform like VP is the most useful in terms of collaborating with people across the country on such scuttlebutt efforts.
Experts, pls explain, want to understand how insolvency works. As i understand, first all money gets paid to lenders, and then, maybe if some remains, to shareholders. But want to understand in detail.
Thanks in advance…
u have to visit the company website were u will get the concall detail in investor relation or u can go to researchbytes were u can find the concalls and its transcripts.
I have a very basic question. In IPO we can understand company raise money from retail and institutional investor against equity in the company.
But once money is raised what motivation company has to keep its share price high or low.
How does trading in secondary market (I mean exchange of shares between various share holders among themselves) help company?
For Banks and NBFC I think it matters because from time to time they dilute to raise more capital. So higher their stock price better for them. But how does it help a pipe company or a paint company.
Assuming if the promoters do not own any shares in its company or do not have any ESOPS and they are not going to raise more equity going forward trading in secondary market does not matter for company.
If the promoters own the company, they have skin in the game. Secondary market trading determines their wealth.
If there are no promoters as such, Sharehodlers are usually after the CEO / management for the company’s performance. So secondary market performance, although it doesn’t directly impact the management, can change the attitude of the sharehodlers towards the management (At least long term price performance).
A drastic drop in share price can attract unwanted takeover attempts.
Hello forum,
while performing valuation of holding company
do you consider the transaction value of related party transactions?
Did anyone got this doubt at anytime, if yes what transaction values have you considered?
hey saurabh,
great question actually, why should the company be bothered about the share price?
Well, share price determines your value of the company in market.
1.lets say you want to raise capital again, investors consider your past share price performance and accordingly you would be over subscribed or under.
2.other instance, lets say you need loan in future. so they would check your price performance again.
In PE ratio, we use the earnings of the previous year. However, in the forward PE, we use the projected earnings for the next year.
As stated above, the formula of the forward price earning ratio is just an extension of the formula of PE ratio.
Forward PE Ratio= Market Price per Share/Projected Earnings per Share
Here we need to consider two components:
The first component is the market price per share. As per the market price (at which the potential shareholder would buy the stocks of the company) can change over time, at different times, the market price would vary. We need to divide the market price by the number of outstanding shares of the company to find out the market price per share.
The second component is the projected Earnings per Share. As an investor, you can look at different publications to find out about the projected earnings.
We can calculate Forward Earnings per Share by using the formula :
Forward EPS = Projected Earnings/ No. of Outstanding Shares
Having put forth above calculations , one should also consider the fact that how growth rates can impact PE ratios. When earnings fall, EPS decreases over time. Therefore, even if you pay a low multiple of earnings now, that multiple will become higher in the future. So while a stock may look cheap based on past earnings, it could be expensive based on future earnings.
Different publications may have different opinions about earning’s potentials of the stocks & their own individual methodologies to arrive at figures of forecasted earnings. Also from a contrarian viewpoint , I think Investors may have an opportunity when market expectations about a stock(or about the Index on an average) are wrong and are not fully appreciated. Having said that , Such kind or reports by Analysts or Research Houses may give an opportunity to spot Value Investment bets well in advance, but at the same time Investors needs to look at a bunch of other financial ratios as well because PE ratios won’t reflect clearer picture of key investment perspectives such as advantages of cash or disadvantages of debt.
This is how I thought it was calculated. But that doesn’t sync up with the article.
I will repeat my comments here
“This article was written back when the Nifty regular P/E was 29. How can regular P/E be 29 & forward P/E be 18? That would mean an expected growth in EPS of 60% in 1 year. How is that even possible?”
What does it mean that ROCE (return on capital employed) should be more than cost of capital. [Saurabh Mukherjee] keep talking about this. And why very few company has ROCE > cost of capital. Can you please explain with some example.
I just had a question regarding which I needed clarity…I am planning to put some fundamental analysis videos on youtube…just wanted to make sure it is within the ambit of SEBI rules…any clue?
