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Showing posts from 2016

Demonitisation - Old 500 and 1000 INR not valid any more

Is Demonetization a good thing or a bad thing? Recently, I have read a lot of positive and negative news: Major Positives: Black Money will be eliminated for now. Terrorism activities will be curtailed for at least 3 months (in Srinagar, daily activities like stone throwing, bombing etc have been reduced and people have come out in public and schools have been reopened, maoists and naxalites activities reduced) Inflation will be reduced. GDP will grow. Major Negatives: People who have been standing in ques for countless hours (This might be also to the fact that lot of black money might be distributed to various people who come to stand in line to deposit and to take the deposited money) 60+ people dying (This is not Government's fact.  It is the mob's fault) Small business affected, probably. We have to define small business, today even vegetable vendors make more money and evade tax. Businesses who come to our house regularly, selling petty things, who make

How to values stocks (based on profitability and growth) - excerpts from Thomas Howard

Return on Equity = ROE Net profit margin = NPM Total Asset turnover = TAT Equity multiplier = EM DuPont ratio analysis : ROE = NPM x TAT x EM Look for Company's growth potential.   How does a company grow?  - retains earnings for reinvestment in the company.  reinvests the retained earnings in assets, both physical and human, ultimately producing more revenues.  revenues to grow faster than shareholder equity and in turn earnings per share grows faster than revenues. dividends per share if it exceeds earnings per share, growth is good. dividends per share growing more slowly than earnings per share means that the company's ability to pay future dividends is improving, which is a positive thing. Sustainable growth = ROE x retention rate retention rate is the fraction of earnings retained. Look for Dividend Growth V=DPS / (R - G) V = Current value of the stock DPS = dividends per share expected to be paid over the next 12 months R = required rate of retur