I require Help?

hi munchikana and ahmed,

attached please find a excel worksheet which i made a couple of years back to derive basic ratios, book values, eps, ronw etc etc. may be not perfect but useful.

and regarding market timing, never ever try to do that.

cheers,
jdm.

Attached Files

Valuations.xls (17.5 KB, 20 views)

Hi jdm,
Great sheet sir. But i am not able to save it on PC. it was just browsing and if i do save as option of file menu that is not working. I tryed several time. So help.
Also i want to know about the PE ratio. Actually punj lloyed PE ratio is very high 470 but the company have got many no. of order so if the PE is high means company is good or bad? i know that above 15PE is not good and its PE is 470 and this company is 50% down in this episode. so is the company share price is good or still bad.

thanks for the sheet(Still not able to download it)

Ahmed

Hi Ahmed,

Well, share prices are arrived at based on their P/E (Price to earnings) and not by any other factor. That why when the P/E of a company goes very high, it is called overvalued. First let me tell you how the P/E is arrived at,

P/E can be arrived by dividing the current market price with the earnings per share. Say for example the EPS (Earning per share) of Gujarat Ambuja is 7 and it market price is 90 then its PE is 12.5. The average industrial P/E for cement sector is around 14 - 18 and so Gujarat Ambuja's share price will move in the range between 98 - 126 with its current earning level. If its earning potential increases its price too will move up.

This is how IPO' s are priced in the market. Say a company X is bringing out an IPO in 2006 and this company is an Infrastructure Company. The average P/E for infrastructure companies is around 30. If this companies expected Earnings per share for the year 2006 - 2007 is 10 then the company may price its IPO in the range of Rs.300 - Rs.350. (This is how IPO's are priced in the market.

Hope i am able to throw some clarity in pricing of shares.

Bye

A.K.Siva

Hello Siva,

Very useful information. Let me know is there is any official formula in pricing an IPO. Is govt.(or SEBI) have control on pricing an IPO? How you come to range of Rs.300-350 for P/E 10?

Regards.

K.S.Kachhwaha

hope you get it now.

Attached Files

Valuations.zip (3.4 KB, 9 views)

[quote=Madosiva]Hi Ahmed,


This is how IPO' s are priced in the market. Say a company X is bringing out an IPO in 2006 and this company is an Infrastructure Company. The average P/E for infrastructure companies is around 30. If this companies expected Earnings per share for the year 2006 - 2007 is 10 then the company may price its IPO in the range of Rs.300 - Rs.350. (This is how IPO's are priced in the market.


A.K.Siva


I add one more point here. On a lighter note as well. Exercise to "price" IPO begins (in respect of some shrewed promoters) begins two or three years before bringing out an IPO. In respect of some lesser shrewed folks, it begins about one year before the IPO. How? By cooking up the balance sheet of the company, which comes out with an IPO. Just see how dramatically the performance of the company improves since last two or three years prior to IPO date. This does not happen during the last so many decades of the history of the company. EPS improves dramatically. One more interesting aspect to note here is that group companies under the same management do not show the same propensity to improve their performance just like the company coming out with an IPO. They are and they will languish in their performance for ever or until one or two years just before their IPO. So when he EPS improves, naturally it must command better P/E ratio, so thinks the promoter. They price the issue which not only discounts the past heavily, but also so many decades of performance in future. Whose shares are being offered in IPO? Usually promoteres. Promoters rarely (read it as never) subscribe their major portion of the holding at IPO price. It is for gullible people like you and me to subscribe in an IPO and wait for the next few decades to get back our original investment without any interest or return. If you have any doubt, just scan the high profile IPO's that have come in last six to eight months. You will notice that Iam not joking. See Jagran Prakashan, Unity Infra, Deccan Aviation, Jet Airways etc. etc. More the high decible campaign, more should be the care taken before subscribing to such an IPO.

Hi jdm,
thanks i got it now.

Ahmed

Hi siva and munchikana,
Thanks a lot for such short and sweet explanation siva. Also munchikana for adding more information. I also have some query can u solve those

1) How speculator manipulate the price of the share?

2) Suppose a XYZ company trading with no bid and offer quantity and price of the share is 30. If some one bid for only 5 (or say 1) quantity with bid price 40(remember the price if the share is 30 only and bid is 40). What will happen in this condition? (Is price of the share increase if any is agree to sell on 40?)

and the third one

3) How to time the market?

I am not able to get the answer of this question so came here i know here will get the Answer so please help me. As I require Help?

thanks in Advance

wrgrds
Ahmed

Stock Prices could be manipulated in many ways. In the example you have quoted, if someone bids for a stock at 'market price' when there is no offer available, the stock usually hits its upper freeze. But in the case of limit order the stock will not hit circuit but the bid prize will remain in the order book and if there is no offer quantity the stock price will the remain the same at the last traded price.

For your other question the SEBI does not have any guideline for pricing of IPO's till now and it will not have any in future also as any such moves by SEBI will affect the pricing mechanism of the stock market. So it's rather good to stay away from overvalued IPO's than expecting SEBI to help you out.

I really did'nt get your question on 'Timing' in Market. If you could be more specific, i would be able to answer it.

For the Question thrown by Cemcom, the IPO is priced by multiplying EPS with the market average P/E. i.e 30*10 = 300. Hope you got your doubt clarified.

Bye

Siva

Hi siva,
Thanks for the quick reply. You have cleared many of my doubt thanks. Actually i have heard the term timing the market is very important for intraday players so i am excited to know it. I think it mean to be market prediction in advance. Also about the stock manipulation you have explained simply. You have stated there are many ways to manipulate the stock so i have searched to find the ways of stock manipulation but i can't find. I have visited to your site www.art-of-investing.blogspot.com to search the same, even thogh i can't find the topic but i found many other usefull things from your site. So i wanted to request u if u know some links for the stock manipulation so send it to me. Also if not please explain two three ways of stock manipulation.
Actually i want stock manipulation idiea just for safety so that i can't be fool.

Thanks in advance siva Sir.
ahmed