Thursday, May 28, 2015

Electrosteel Steels Ltd: Fairly Priced But Risky

Dear Maheshji I would appreciate if you can provide your research analysis (my is ID 14575) on Electrosteel steels With best regards Jeevan K Shetty.
Respected Shetty ji 
1.Electrosteel Steels Ltd is a 10.00 Rupee face value Construction & Engineering Stock which currently traded at 4.16. 
2. Year High ( 52 week High) of Electrosteel Steels Ltd is 7.85 and Year low (52 Week low) is 3.28, So as per my 52 week high/low ratio formula this ratio is 2.39, If you read my book then you may knew that If any stock year high/low ratio is above 2 then stock price is not stable and generally I am not recommended to buy any stock which year high/low ratio is above 2. 
3. Electrosteel Steels Ltd have total 2409235023 shares, Promoters hold 45.23 % FII hold 0.45% and DII hold 1.04 % shares.Promoters pledged theire 79.53 % stocks so I am not like this stock due to pledged shares. 
4. Electrosteel Steels Ltd Net sales on FY 2014-15 is 1831.24 Cr., So when we divided total shares 2409235023 in FY 2014-15 sales then we get a ratio “Net sale per share per year” which is 7.60. 
5. So If we compare this 7.60 from current market price 4.16 then we find that CMP is below Net sale per share per year, So CMP is a fair price for this stock. 
6. Base Price (3 Year Average Price) of Electrosteel Steels Ltd is 4.94 So CMP is also below the base price so we say currant market price is a fair price for buy. 
7.Book value of Electrosteel Steels Ltd is 7.15 , So CMP also discounted to book value, price/book value ratio is 0.58, If you are not familiar with book value then please read this article Book value importance in fundamental analysis
8. Overall I think I think this share is a risky buying, because stock have fairly priced if we see it net sale and book value criteria but due to pledged shares of promoters and nil dividends plus unfavarable year high/low ratio I am not recommended it as a safe fundamental buying. 
9. Discloser:- I am an existing research analyst and passed NISM certification for research analysts. I am also applied for a grant of registration under SEBI(RESEARCH ANALYSTS) REGULATIONS, 2014 and I have/my wife have no any stocks of this company so my personal interest is not included in this stock. 

Saturday, May 23, 2015

Stocks that trade at a discount on their book values are bargains (undervalued) or not ?

Please suggest for buying share, we should consider 'Book Value'. It should be less than CMP or not. There is no any chapter in book about book value except for calculation in fundamental TP. Please suggest is it necessary to see individual book value of share except TP calculation. Ask by Ashwani Kumar ( registration number 13145). 
 Respected Sir, 
1.Sorry for late reply because I am busy on my NISM-Series-XV: Research Analyst Certification Examination and happy to annouce that I am passed this exam with 67 % marks.
2.Book Value of a company is the net-worth of the company. To compute book value per share, net-worth of the company is divided by the number of outstanding shares. 
3. If we take it in simple terms, book value per share means the theoretical amount of money each share would get in case the company business was to wind up. 
4.I am not use book value as my research criteria because the realizable value of company assets may be different from book value and is never known with certainty. 
5. Some of analysts use price-to-book value ratio (P/BV) which find price relative to the value. 
6.The P/BV measures a company's current market price (CMP) vis a vis its book value. 
7. An important limitation of this number is that most assets on the books of the company are shown at their historical cost less depreciation and not their realizable/liquidation value. 
8.P/BV less than 1 indicates the company is trading below its book value, and hence the stock is deemed to be undervalued. 
9.However, it is pertinent to ask, ‘why is the market pricing the share at a price less than BV?’ Please note that there may be several reasons for a stock being available for less than its book value including the poor investments made by the firm in the past which need to be written down subsequently. 
10.Hence, all the companies with P/BV less than 1 may not be value buys. Investors should not rely only on PBV for their investment decisions and should understand that not all stocks that trade at a discount on their book values are bargains(undervalued)
11.PBV is not relevant for sectors such as the service industry where assets are limited, You always see that IT stocks have a low book value and banking stocks have higher book value.
12. So this is the reason that why I use Price to net sale per share ratio for more accurate identifying measure of value buy.
13. Read my earlier article about book value at this link
Download Free list of All Indian Companies book Value
13. One Humble Request:- If anyone buy my book and not review it on seller site (Amazon , Flipkart, Bookadda etc) then please take 5 minute for my service and review my book on seller sites ( Amazon Flipkart etc). 
Mahesh Kaushik

Sunday, May 10, 2015

5 Penny Share for Long Term View.

Dear Mahesh ji, 

 I want to invest 50000 in small penny stocks for a year or so..Can you suggest some stocks. I already have Lupin,country club, crompton greaves,sun pharma,yes bank in my portfolio. How is icici bank in pvt banking sector. Would like to buy stocks which are available at low values. I know it's a big mail..but your views are expected Thanking you Ripal Gabhawala Id : 14574 
1. Respected Ripal Ji, If you ask only single share in a question then I am able to provide you a complete research analysis for particular share but you mix so many stocks in a single question. 
2. Now I try to reply your multiple queries , first you want to invest 50,000 in penny stocks... I want to ask why penny only? It is wise to mix your portfolio with large cap , mid cap , small cap, penny stocks and mutual funds. 
3. Ok, Now I provide you my selected penny stocks for 1-2 year view

4. In your current portfolio Country club is a best long term bit.

5. For ICICI Bank read net sale per share chapter in my book carefully then analysis ICICI Bank net sale per share , You find that fair value of icici bank is 85 ( please remember 85 is not a target, in my theory it is a price where stock turn in undervalued and may be a strong value buy ).
6. For list of low valued stocks visit this link
7. Discloser:-I am an exiting research analyst and applied for a grant of registration under SEBI(RESEARCH ANALYSTS) REGULATIONS, 2014 and my wife hold HB Estate Developers Ltd ,Modern Dairies Ltd,Shree Renuka Sugars Ltd,Confidence Petroleum Ltd,Veer Energy Ltd Country Club,stocks so my personal interest is included in all of these stocks.

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