Reblog: How to use the P/E ratio


Valuations are looked at through the prism of cash flows, earnings, corporate governance, return ratios, debt-equity proportion and so on. Within these, the most primary valuation tool used by investors is the Price Earnings (P/E) ratio.

The P/E ratio is arrived at by dividing the stock market price with the company’s Earning Per Share (EPS). For example, a Rs 200 share price divided by EPS of Rs 20 represents a PE ratio of 10. Theoretically, it translated into the assumption that if we were to buy this company today it would take 10 years to earn back our investment.

The Trailing P/E ratio uses the earnings of the last 12 months, while the Forward P/E uses the expected earnings for the next 12 months, which means it requires estimating the forward earnings.

At Mumbai’s Morningstar Investment Conference in October, equity market strategist Ridham Desai and head of Morgan Stanley’s Indian equity research team tackled the subject of India’s high P/E.

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stockarchitect July 16, 2018

Aswath Damodaran / Cadence Capital / Karl Siegling / Morgan Stanley / morningstar.in / PE / Price to Earnings / Ridham Desai /

Reblog: 8 step basic fundamental analysis for beginners


In this post I will present a simple 8 step fundamental analysis template which can be used to analyze if a a stock is investment-worthy or not.

For any stock to merit investment, the most important thing is the financial stability of the business. It is important that a company has manageable debt levels and generates enough operating profits to easily pay interest on its loans and has sufficient cash for day to day operations while delivering decent growth in revenues and profits.

I use the first four ratios described below to assess the financial stability of a company when i consider investing in its stock.

  • Long term Debt/Equity Ratio –
    Debt/Equity Ratio is a debt ratio used to measure a company’s financial leverage, calculated by dividing a company’s total liabilities by its stockholders’ equity.
    Companies (excluding financial institutions) with D/E of less than 1 to be stable and can easily cope with short term downturns as they have higher reserves than what they have borrowed.
    D/E= Sum of non current debts/Shareholder Funds.

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stockarchitect September 6, 2017

Cash flow / Current Ratio / Debt to Equity / Fundamental / Interest Coverage / Investment / PE / Price to Book Value / Price to Earnings / Return on Capital Employed / Return on Equity / Sethinomics / Stock /

How to hunt value and discounts in market!


The original post is by Mastermind, Megabaggers and appears here.

I find it ironic that more research is being done today than at any point in time in the past, yet a lot of value investors are failing to beat the market.

Ironically, the mountain of articles on popular investing websites just aren’t helping. Part of the problem might be due to the “more brains” problem Graham cited years ago. Since everybody on Dalal Street is so smart, all those brains ultimately cancel each other out.

This glut of brain power, investment research, and investors clamouring for bargains does not mean that you can’t beat the market. But, knowing how to pick value stocks is a key requirement, along with having a good strategy and being prepared to do things that most other investors aren’t.

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stockarchitect May 25, 2016

Ben / Buffet / Cash flow / Dividend / Graham / high / Investor / Megabaggers / PBV / PE / pick / Price to Book Value / Price to Earnings / small / Stocks / Value / Warren / yield /

The Simplified Version: What It Means When Mauritius Based Investors Are Taxed in India From 2017


This post is authored by Mastermind, Deepak Shenoy and appears here.

Mauritius based entities that Invest in India – from Private Equity investors, VC funds, and investment pass-through vehicles (which issue participatory notes) will start to see taxation apply to them from April 1, 2017. This is due to a treaty change between India and Mauritius.

Here’s the full text of the treaty change.

Dude. Simplify.

Okay. Here’s the deal.

Currently, if you are a foreign investor, you can invest in Indian companies – both listed and unlisted. When you sell them, you would pay capital gains taxes in India (as many NRIs do) and some of those gains are withheld before you get the money.

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stockarchitect May 11, 2016

algo / Capital Gain / Cyprus / DeepakShenoy / DTAA / FCCB / GAAR / Gati / Long term / Mauritius / Participatory Note / PE / PN / Private Equity / Singapore / trader / Treaty / VC / Venture Capital /