July 2023 - Ecostar Business

Fundamentals versus PE holding vanity

July 22, 20232042 Views0

Why do continuous loss-makers command a high future earning ratio? Some stocks are worth buying based on their strong financial fundamentals, future business potential and empirical evidence of their business sustenance. Advisors recommend such stocks with an expectation of a stake sale premium when one private equity or strategic investor sells its holding to another buyer at a premium. That is no less than speculative pricing, an inseparable part of the equity market. While the former is a safe bet, the latter is not always. Stocks of companies with private equity investments usually command a high price-earning (PE) ratio for no justifiable reasons. Such stocks move up based on newspaper reports of stake sales, which the “suitor” denies subsequently. They hit the limelight be...

BlogKnowledge SeriesUdaykumar K.V.

Deepak Nitrite

admin

July 22, 20231727 Views0

Wait and watch defensive stock Deepak Nitrite already has a price-earnings ratio of 32 times over the earning of 2022-23, its stock may not be very lucrative unless something drastic comes to shareholders. The earning ratio is above the Sensex average. The indices are already ruling high. The chances of anything drastic seem weak in the long run. Its equity base is low at Rs 27.5 crore. With a book value of Rs 300 on a Rs 2 share, a bonus is not a remote chance.The financial result last year showed some pressure on its net margin. Naturally, return on equity also had a corresponding beating. The efficiency of capital deployment also decreased. A diversified product portfolio and leadership are some of the products that ensure it is a safe business. Though its PE ratio is...