Stock Analysis - Example with Ashok Leyland




Ashok Leyland (AL) is 2nd largest commercial vehicle in India.

Disclaimer - The below items are based on personal learning over a few months so I'm not a expert and recommend ppl reading(incase anyone) to do their own research and plunge into share market. This is no way a recommendation page. 

Why I'm buying AL shares in (Nov-Dec) '19 ? The current slump is temporary due to economic conditions and Axle /BS VI norms. Also this has resulted in large inventory  in Q3. So I hope to see there will be turn around in March'20.  
Earnings Per Share - Net Profit dividend by Number of shares.
For example - 2019 Net Profit is Rs.19832000000 / Number of outstanding shares is 2935527000. 
Earning Per share is 6.76.

What will be share price of AL in 2023 ?
My assumption it will be between Rs.197-340 i.e. with average 20% growth year on year. Why averaging at 20% - One year it can go as high as 30% and other year at 10% . With mSME picking up volume are bound to go up. 

The price-to-earnings ratio (P/E ratio) = Current share price divided by Earnings per share (EPS).

Price to Earning(P/E) is generally used to get the future pricing. Cash flow is very important and its been growing i.e. 390cr in 2016 to 1983.20cr in 2019.



The price bound is calculated with EPS of 14.01 in 2023 multiplying with lowest P/E -14.05 which values the share at 196.95 and when multiplied with highest P/E 24.28 will make it 340.33. 

Also, active stock trading is important and delivery stocks indicate that people are willing to keep it for long term
Management is stable but if they can bring in a strong CEO things will improve dramatically.

Sanjoy Bhattacharya - Of all the Indian investors to whom i have listened/read so far, his advise is simple, practical & insightful. 
He is brilliant and humble.
Investing - What you Pay, Time Horizon, Bet Size

Important Rules -

1. Buying 'The Lost Cost Producer' 
(Example - Balkrishna Ind= Makes tyres and competes in European markets with Big brands coz of the low cost & quality has big share of market)

2. Business with 'Product Differentiation' (Classic example Nestle,ITC where consumer are willing to pay more i.e. a mother would happily pay for Cerelac, Maggi, Coffee though there are lot of players in this segment). 

3. Have a proprietary advantage like licensing ,design,technology. Example (Container Corp - access to wagons compared to anyone else biggest edge when it started)

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