VP Chintan Bethak 2017 Goa- Incremental Learning: looking beyond P/E multiple

This was my third annual VP meet for me and still I got overwhelmed by the sheer amount of learning that I got in a short span of 5 days. The diversity of investment style, the range of topics, insatiable thirst for learning new things and incredible passion by all participating makes this an event one looks up to every year. A special mention about 5 new entrants this year…the investment maturity curve has been exemplary to say the least.

This year, one of the new things in the meet we did was that each one of us had to present our incremental learning in last one year. It was a brilliant idea as one had to get out of “action” mode and reflect on what the new experiences in the market have taught us. For me, the biggest learning this year was to look beyond earning multiples. I always had this “handicap” of not even looking at businesses trading at high P/E multiples and my mind would just shut off. However, over the last year I have realized that there may be specific cases where high P/E multiple may not represent high valuations and as most investors stop looking beyond P/E multiple, it infact may present an opportunity to someone who is willing to take more holistic approach towards valuation.

I am sharing my presentation and would love to get feedback from the fellow VPers.

Looking Beyond PE Multiples.pptx (89.6 KB)

Disclosure: The examples used in the presentation are for illustration purpose only and I may/may not have invested in the same. This is not a buy/sell recommendation and one should do his/her own due diligence before investing.


Good presentation Dhwanil…market cap to sales is one metric which is so under appreciated specially now when GST has forced corporates to report real numbers.

Also global peer comparison is something which people ignore because they feel it’s not apple to apple comparison but what more important is how companies would look like when our market matures (5-10-15 years down the line)

Great presentation with good insights and examples


@desaidhwanil great presentation. I can imagine the work you have done to build this models. i have a few doubt in the presentation.

In slide 2 u have spoken about value traps. Which key variables will differentiate a value trap from a value company? Is it growth in cash flows alone?

In slide 7 regarding “Future earnings can grow exponentially because of the small base with respect to extreme large opportunity size” as explained with repro company. How one can pick this companies at early stages. Any suggestion for building a framework for finding such companies.

Thanks @kunal_patel, I completely agree about utility of looking at similar business models outside India. However, at the same time we must appreciate the differences in business model as well as business/cultural environment to arrive at right inferences. Having said that, I have always found such comparisons a good starting point to have the context around a business model.


I think it varies from company to company however it boils down to two main things. In case of cash/assets lying in the company- it is management’s intention to part with the money/benefits of asset value with minority shareholders. I have observed that in many cases, cash on the books just remain that…! It never comes back to shareholders.

Secondly, in cases of debt capacity bargains/net working capital plays- it is absence of growth that can create value traps. Many of the companies remain at the same stage for year as management has no intention to grow the business. Hence, no matter how cheap they are, the gap may not close as market will always discount absence of growth.

On you point of picking companies with small base and large opportunity size, I do not have any framework around it. However, when we come across companies that is doing something unique different in area that touch our lives as consumer/vendor, we must sit and take notice especially if the market cap is small. A caveat here is (as mentioned in presentation too), not all small market cap and large opportunity size combination are apt for ignoring P/E. We must zero in on something where the selected business can do things that is difficult to replicate.


@desaidhwanil sir view on how to understood valuation of turnarounding companies??