A FA study based on pe and roce, comments please

ravi_s_ghosh · #1 23rd September 2007, 01:26 PM

I made (tried to do so rather) an analysis of indian stocks based on 2 criteria, PE and Roce, to get a list of stocks which has the best combination of both of these values. In other words, stocks which have a high growth potential and are available at cheap price. I did this study on the basis of the book "The little book that beats the market."

I obtained the above data from www.icicidirect.com and I am not very much sure on the quality of the data. However, even if 80% data is accurate, then the average result wont be very inaccurate.

Please find attached the csv files which list companies with best companies at top and worst at the bottom (the lowest score of "best combo" signifies best scrips).

Incidently, the scrips found on the top are showing positive technical trend, eg, hinduja tmt is showing a divergence between price and macd.

Please comment to improve this method of screening stocks and on individual stocks as well.

tanewbie · #2 23rd September 2007, 01:30 PM

hi Ravi

where u get the funda data from?
canyou give the bse code and/ or nse code for your excel sheets.

In Amibroker u can incorporate the fundas.

oxusmorouz · #3 23rd September 2007, 03:10 PM

Quote:

Originally Posted by ravi_s_ghosh

I made (tried to do so rather) an analysis of indian stocks based on 2 criteria, PE and Roce, to get a list of stocks which has the best combination of both of these values. In other words, stocks which have a high growth potential and are available at cheap price. I did this study on the basis of the book "The little book that beats the market."

I obtained the above data from www.icicidirect.com and I am not very much sure on the quality of the data. However, even if 80% data is accurate, then the average result wont be very inaccurate.

Please find attached the csv files which list companies with best companies at top and worst at the bottom (the lowest score of "best combo" signifies best scrips).

Incidently, the scrips found on the top are showing positive technical trend, eg, hinduja tmt is showing a divergence between price and macd.

Please comment to improve this method of screening stocks and on individual stocks as well.

Hello,
By comparing the PE ratios of different industry stocks, you are comparing ice-creams with screw drivers. Besides, PE, ROCE etc you are ignoring other aspects, such as market share, quality of top management, growth potential in the industry, % of productive assets to total assets, kind of leverage the firm employs and ability of the firm to service its debt, cyclical nature of the companies, type of buyers and their purchasing power, brand value, employee attrition and lot lot more.

CreditViolet · #4 23rd September 2007, 07:05 PM

Quote:

Originally Posted by oxusmorouz

Hello,
By comparing the PE ratios of different industry stocks, you are comparing ice-creams with screw drivers. Besides, PE, ROCE etc you are ignoring other aspects, such as market share, quality of top management, growth potential in the industry, % of productive assets to total assets, kind of leverage the firm employs and ability of the firm to service its debt, cyclical nature of the companies, type of buyers and their purchasing power, brand value, employee attrition and lot lot more.

Hmm...we were talking analysis stuff on a quiet sunday afternoon and you have to bring logic into it!

oxusmorouz · #5 23rd September 2007, 08:08 PM

Quote:

Originally Posted by CreditViolet

Hmm...we were talking analysis stuff on a quiet sunday afternoon and you have to bring logic into it!

...

kkseal · #6 23rd September 2007, 09:10 PM

Quote:

Originally Posted by oxusmorouz

Hello,
By comparing the PE ratios of different industry stocks, you are comparing ice-creams with screw drivers.

One way of avoiding this is to take the ratio [Industry PE/Stock PE] instead & look for ones with a Relative PE of <1. Also RONW is a better measure than ROCE.

Regards,
Kalyan.

ravi_s_ghosh · #7 24th September 2007, 05:05 PM

Quote:

Originally Posted by tanewbie

hi Ravi

where u get the funda data from?
canyou give the bse code and/ or nse code for your excel sheets.

I got the data from www.icicidirect.com>research>stock screener (custom search)

You can get the list of nse securities with codes from here.

http://www.nseindia.com/content/equities/EQUITY_L.csv

Quote:

In Amibroker u can incorporate the fundas.

Could how please explain how. I guess ami quotes uses ***** to download fundamental data, but unfortunately ***** finance does not have fundamental data for indian equities.

ravi_s_ghosh · #8 24th September 2007, 05:21 PM

First of all, thanks a lot for giving so your valuable opinion.

Quote:

Originally Posted by oxusmorouz

Hello,
By comparing the PE ratios of different industry stocks, you are comparing ice-creams with screw drivers. Besides, PE, ROCE etc you are ignoring other aspects, such as market share, quality of top management, growth potential in the industry, % of productive assets to total assets, kind of leverage the firm employs and ability of the firm to service its debt, cyclical nature of the companies, type of buyers and their purchasing power, brand value, employee attrition and lot lot more.

Quote:

Originally Posted by kkseal

One way of avoiding this is to take the ratio [Industry PE/Stock PE] instead & look for ones with a Relative PE of <1. Also RONW is a better measure than ROCE.

For all that one needs a stock analysis firm with n number of employees working full-time and doing all that research. Is that feasible for an individual investor. Then it would be better to go to a mutual fund rather than buy equities directly since they would do all that research for you.

Again, there are so many industries that catagorizing 3000 companies and then finding out that whether a company is cheap in comparison to sector pe or not is in itself a herculean task.

My idea was to keep things simple so that one do not need a stock analysis firm and get a list of cheap stocks with good earning growths. Then one can do in-depth research selectively from top of the list. I believe that would be much easier than doing the same for 3000 odd scrips.

Again, I do seek your opinion.

oxusmorouz · #9 24th September 2007, 07:30 PM

Quote:

Originally Posted by kkseal

One way of avoiding this is to take the ratio [Industry PE/Stock PE] instead & look for ones with a Relative PE of <1. Also RONW is a better measure than ROCE.

Regards,
Kalyan.

Well, we just keep getting back to PEs in fundamental analysis, don't we? Just like we keep getting back to moving average crossovers in TA

dinesh26 · #10 25th September 2007, 09:56 PM

Hi Ravi,
I appreciate your effort.My humble opinion is that your table can serve as a first screener
for stocks. But it does not dispense with the need for further thorough research.If you are a die hard fundamental analyst then ther is an interesting thread in this site viz
"A Tool For Fundamental Analysis" started by Suresh123. On the Excel sheet you can
analyze individual stock deeply.
happy investing
dinesh