Ask me anything about stock valuations


#1

Hey everyone,

I’m Anugrah, Co-founder, smallcase. Before smallcase, I was working with Nomura - a leading Japanese investment bank, designing equity and thematic strategies for global institutional clients.

Even though history has clearly shown equities are the highest yielding asset class in the long term, a lot of people still prefer traditional investment products like Gold and real estate. We at smallcase are trying to make this shift happen by building low-cost, transparent and easier to understand investment solutions.

So, yeah, ask me anything about valuations and I’ll try to answer to the best of my knowledge. :slight_smile:

Note: This thread will remain open until Friday.


How can we analyse if the stock is undervalued or overvalued
#2

why some stocks which have strong fundamentals remain undervalued in present bull run?


#3

@Anugrah,

Thank you for the AMA:)

I do have a question for you: What are the 3 most important and defining parameters/ratios to consider when you value a stock for investment? And what is the ideal duration of a long-term investment?


#4

#5

#6

Besides analyzing Quantitative parameters such as high Earnings Yields and high Return on Assets, and analyzing Qualitative parameter such as robust management, do you see any more scope to analyze the stocks or am I suffice? As I am getting very satisfied return just by applying those parameters. Here is a proof :- http://shareboss.in/sabyasachi/portfolios/Huge-Multibagger-Potential.
Disclaimer:- I do invested those stocks and planning to keep those for a at least 3 years of time horizon.


#7

What data provider do you use at Smallcase ? Have you managed to get some good deal getting discounts for data providers ?

How do you think about tax disadvantage of investing via small case (due to short term capital gains on turnover) versus MF that are exempt to pay any taxes within the vehicle ?


#8

Oh one more - why did you choose the profile photo you chose.


#9

How to find fair value of a stock ??


#10

You read this before asking this question?


#11

Multi baggers and valuations, how do I connect the two?


#12

Hi anugrah,

Small case is a great initiative and wonderful way of channelizing savings into direct equity.

I have following questions about stocks which forms a part of small cases.

  1. what is the benchmark for a stock to enter any smallcase.

  2. what kind of due diligence is done before including a stock in smallcase. I mean can it happen that stocks which forms a part of small cases, are operator driven.

  3. Do you include bse listed stocks,

4)If any regulatory action is taken against this stocks what will happen to the small case.

  1. what is the logic behind weightage decided for each stock.

Regards
Mihir


#13

I am a newbie here, but how does one get to calculating the correct value of a security?


#14
  1. On what basis 1Y Forward EPS Growth is calculated ? e.g Alembic Ltd is shown 1Y Forward EPS Growth =258 , Saregama India Ltd is shown 1Y Forward EPS Growth =342 can we believe this ?
  2. Why BSE listed stock are not covered , are they not worth buying ?
  3. How do smallcase screener determine
    Value Momentum Rank
    Percentile rank of the stock, based on the price momentum as well as valuation characteristics
    Price Momentum Rank
    Earnings Quality Rank
    Price to Intrinsic Value Rank
    Fundamental Score
  4. How authentic and reliable Broker Ratings parameters are ?
  5. Lastly Screener should be able to provide single stock fundamental parameters

#15

Why Pincon Lifestyle is in lower circuit despite having decent fundamental score ?


#16

What ratios should we be using to analyse weather the stock is overpriced or underpriced . In other words how do we determine fair value of the stock


#17

Undervalued describes a security for which the market price is considered too low for its fundamentals. Some metrics used to evaluate whether a security is undervalued are P/E ratio, growth potential, balance sheet health, etc. It is the opposite of overvalued.

A stock may become undervalued in one of two ways. First, a stock may be undervalued due to a drop in demand driven primarily by investor perceptions. If a drop in price is not justified by the issuing company’s actual financial status as manifest by its fundamentals and analyst growth projections, the security could be undervalued.

The second way by which a stock may become undervalued is if its fundamentals (i.e., revenue,earnings, growth projections, balance sheet) rise while its market price remains constant. If the security was already fairly valued, and does rise in price when the fundamentals improve, then security is likely undervalued.

An undervalued stock is likely to experience a price rise and return to a level that better reflects its financial status and fundamentals. Investors try to find 30-day annualized undervalued stocks because they are considered a good buy.

Overvalued describes a security for which the market price is considered too high for its fundamentals. Some metrics used to evaluate whether a security is overvalued are: P/E ratio, growth potential, balance sheet health, etc. A stock may become overvalued in one of two ways. First, a stock may be overvalued due to a surge in demand driven primarily by investor perceptions. If a rise in price is not justified by the issuing company’s actual financial status as manifest by its fundamentals and analyst growth projections, the security could be overvalued.
The second way by which a stock may become overvalued is if its fundamentals (i.e. revenue,earnings, growth projections, balance sheet, etc.) decline while its market price remains constant. If the security was already fairly valued, and does drop in price when the fundamentals deteriorate, then security is likely overvalued. A stock which is considered to be overvalued is likely to experience a price decline and return to a level which better reflects its financial status and fundamentals. Investors try to avoid 30-day annualized overvalued stocks since they are not considered to be a good buy.


#18

pincon lifestyle and pincon spirits have been hitting 52wk low because their chairperson mr.roy had been arrested in a multi crore scam for illegeally collecting money from investors .


#19

Okay, Any speculation, when it’s lower circuit is going to break ?


#20

it is not just past financial performance and valuation of a company that will push up its’ share price. Market’s expectation of future performance of the company is an extremely important factor that affects share performance and if market is concerned that the company will not be able to perform as well as it did in the past, share performance will suffer. So if a company with good fundamentals is undervalued, the first thing to check is what are the future projections. If your research proves that future projections are also good and believable, then its a good investment opportunity.