I already mentioned how he arrived at this number.He took cost of equity of that time and then took reciprocal it to get the no growth P/E.Cost of equity is not a stagnant number.It keeps on changing with risk premiums and risk free rates.As you said, It was derived hundred years ago.It means you are assuming cost of equity of U.S.A which was hundred years ago.You took average.But,Average multiple already has growth premium.why would you double count the growth?.Argument is simple no growth P/E is 1/Ke.That’s why you add growth multiplier.By your method, Overvalued may seem undervalued.I will advise you to look at the modified formula of Graham.I have seen lot of people using no growth P/E of 7 and growth multiplier of 1.5.There is no thumb rule for growth multiplier.It is really subjective and we really don’t know how did he arrive at growth multiplier of 2.Eps is an accounting number.I really don’t care about EPS.TTM P/E can be misleading.Assume company has done significant capex financed with debt.It will curtail the EPS and due to depressed earnings company may seem Overvalued.It doesn’t reflect true earning power of company at all.Economic value added method works best for me and I’m comfortable with that.Furthermore,Average multiple of sector is not a good measure.Whatif whole sector is overvalued like defense then cheapest in that sector may seem undervalued.
Posts tagged Value Pickr
52 week highs and all time highs strategy (24-09-2024)
Company : VA Tech Wabag Ltd
- Classic VCP pattern breakout
- Last leg tight price consolidation.
- Observe shakeout given before it starts to breakout
- Stock is in uptrend
- I feel continuation of pattern will play out
Disclosure : Taken position (Please go through concalls and earnings to develop conviction)
52 week highs and all time highs strategy (24-09-2024)
Another example of a stock witnessing buying near channel bottom.
Rupa and Company (24-09-2024)
Can anyone provide insights on what is happening with Rupa now?
Nazara Technologies (24-09-2024)
Nazara is pretty much a holding company at this point, as they no longer develop in-house gaming titles. They just keep jumping from one acquisition to another. Most game publishers globally talk about their upcoming releases, but Nazara talks about acquisition targets.
The problem with this M&A playbook is that they have to keep acquiring companies all the time to show growth because casual mobile games have a short shelf life. What is popular today might not be played by even 50% of those users 3 years later. Revenue of the fairly popular Animal Jam has declined from $18.6 million in CY2020 to $11.4 million in FY24.
Can’t really compare Nazara to Tencent. Gaming industry in China is at a whole another level with one mobile game making $2 billion annual sales. Although Mittersain constantly talks up the “future potential” of gaming and esports in India in every podcast and interview, the promoters sold a large chunk of their stake near the 52-week low.
I randomly checked a few casual mobile game companies listed in US, Korea, China and Japan and they all trade at very low earnings multiples and understandably so.
Disc: had invested last year and exited a couple of months ago with small gains. Sum of all parts valuation didn’t really make sense anymore.
Axiscades Mistral Technologies Limited – Hidden Defence Story (24-09-2024)
Here is the recording of AGM. Timestamp for Q&A is 54.25
Enjoy.
Asian Granito Ltd (Asian Tiles) (24-09-2024)
First visit here…Asian Granito (AGL) – Another Kajaria in making
SG Mart- Can it successfully create a marketplace? (24-09-2024)
In this segment anyone can be a market leader.it’s a steel distribution company don’t have any pricing power or any advantage of ,if I sell jsw and tata steel in my areas anyone can do that also so I’d think they’ve any advantage.its not a value adding like steel tube business.if u want seen same thing plz rent a car a go AURANGABAD TO JALNA HIGHWAY you can seen maybe 10 big warehouse shop just selling steel and sheet.i think it’s a bull market stock.if margins are volatile than …
Margin Of Safety (Stocks & Index) stocktrend.net (24-09-2024)
What do you think works then?