Valuation View to learn about Stock Market

Valuation View to learn about Stock Market

We at wealth buildup strongly believe that there are 3 ways to learn about Stock Market.

1) Study the history of last 50 years (Experience of Market Cycles)
2) Study the Stocks that have created wealth (Factors that make money)
3) Study the People who have created Wealth and How (Qualitative factors that make money)

The Problem of Determining valuation for most organizations in India is that the Growth Rate is well over the Equity cost of Capital thus total Valuation procedures like DCF can’t hypothetically function admirably.

What has occurred in the Globe will occur in India and we Indians have favorable position of figuring out how riches was made in other created nations. We unequivocally trust that High PE Ratio alone can’t legitimize that a stock is Undervalued or exaggerated, it’s the open door size and Market Position of the organization which will decide the Valuation. We at wealth buildup utilize valuations of Global Giants to contrast it and Indian Companies and see where they remain against the worldwide pioneers. We discovered some stunning information focuses in our investigation of terminal esteem.

Page Industry V/S (Hanes) – Ofcourse this needs no Introduction, what a class compounder this Page (Jockey) has been. Page has Increased deals from 250Crores in 2009 to 2500crores in 2018 (30% Compounder) and in the Year 2018 it made a benefit of 346 Crores. The Company exchanges at a Market top of 30000 Crores or 4.2 Billion Dollars (That’s a Whooping 86 PE FY2018). Hanes the Global Market Leader of Inner Garments is available in 80% of USA Households has Sales of 46,800 Crores and a Normalized Profit of 4300 Crores this year. Curiously the Profit of Hanes is 1.8x the Sales of Page Industry however Hanes get a Market top of 5.6 Billion $ v/s 4.2 Billion$ for Page Industry.

Whirlpool of India V/S Whirlpool Corporation – Whirlpool of India is a stunning organization and in Last 9 years it has Increased its Sales from 1700 crores to 4832 Crores (12% Compounder) , though it made a benefit of 344 Crores in FY2018. The Company exchanges at a Market top of 18000 Crores ($2.5 Billion). Whirlpool Corporation (Global) has 16% Global Market offer of Appliances and completes a Sales of 21 Billion$ (1.5 Lakh Crores) and made a Normalized Profit of 800 Million $ (5,760 Crores) this year. Strikingly Whirlpool Corporation (Global) who does 15x More Sales and Normalized Profit than whirlpool of India, exchanges at Valuation of 7.2 Billion $ and Whirlpool India Trades at a Valuation of $2.5 Billion. Whirlpool of India hold 20% Appliance Market share in India while Whirlpool Global Business holds 16% Market offer of Appliances in the World.

Retail in India V/S Retail Globally – Globally Grocery Retail has Created a considerable measure of riches. With Walmart and Costco in USA, Carrefour in France, Woolsworth in Australia, Seven Eleven in Southeast Asia, Tesco In United Kingdom while in India the Total Market top of Grocery Retail is $13 Billion for Dmart, $4 Billion for Future Retail, $0.4 Billion for Spencers, 0.6 Billion$ for Aditya Birla More (PE Deal) i.e. India’s Total FMCG Retailers have a market top of less of $20 Billion Dollars while in USA Alone WalMart and Costco Combined have a Market top of $370 Billion, Woolsworth an Australian retailer with 31% Market offer of FMCG retail in Australia has a Market top of $29 Billion which is more than the Entire Indian FMCG Retailers however Australia has a populace of 2.5 Crore individuals which is at comparable dimension to Mumbai metropolitan locale.

Conclusion – This is no mystery that the Valuation of a Company is controlled by the Sustainable Growth Rate (opportunity Size), Long term ROCE (Capital Allocation) and Cost of Equity Capital (Interest rate). There are some Business models which are demonstrated to make riches all around and High PE Ratio Alone doesn’t make them awful. In India organizations like Page Industries are very esteemed contrasted with their individual worldwide goliaths due to the open door measure yet the inquiry each speculator needs to ask himself is that how much this development has just been valued in by the Market.

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