Important factor in fundamental analysis for finance or banks stocks.

[rocky01]

hi friends,
which factors are most important in analyzing fundamentally strong stock in case of banks and financing companies..???
as i take interest-coverage ratio most important with other ratios in all other stocks,but in case of banks and financing companies interest-coverage ratios are very low..!!
e.g. sbin,hdfc.hdfc bank.icicibank,idbi, etc

 

[rvm123]

in my view, whichever may be the industry, if u go by eps, p/e ratio and book value, u will not loose much in the long run

 

[krishna23]

for banks u got a host of stuff
CASA(current acc Saving acc.)
NPA(non performing assets)
NIM(net interest margins)

apart frm the usual valuation parameters like ROE,ROCE,PE,Book Value etc...

 

[rocky01]

thanks rvm123 for reply,what standard you set for eps, p/e ratio,means what it should be minimum...?

 

[rvm123]

p/e ratio should be minimum. if eps is maximum, automatically p/e will be minimum. in my view, any p/e ratio less than 6 is very good for investment

 

[rocky01]

for banks u got a host of stuff
CASA(current acc Saving acc.)
NPA(non performing assets)
NIM(net interest margins)

apart frm the usual valuation parameters like ROE,ROCE,PE,Book Value etc...

hey krishna thanks for helping ,can you explain it in detail....???and how to use all these factors also suggest that with minimum and maximum standard...

 

[Placebo]

Hi Rocky. Although these ratios appear to be very glamorous and a good tool for analysis, the truth is that they are not of much use when valuation is concerned. The obvious question here would be why . The answer to that is because most of the figures (not all) on Balance Sheet and Income Statement (PnL A/C) are all notional by nature and not real. The real value is reflected in the CASH FLOWS AND THE FREE CASH FLOWS. This is where the real value comes into picture. Everything else will provide an unclear financially disastrous picture.

Cheers

 

[krishna23]

CASA improvement would help the bank increase its low cost deposits so would lead to better NIM's...
NPA's tell u abt the credit quality of the bank...higher NPA means lower credit quality...
also look at the unsecured loan book of a bank aKa credit cards,personal loans etc..

ROE or return on equity is very important too do a google search on it's importance...

also finally CAR or capital adequacy will tell u if the bank is adequately capitalized or not...

 

[Placebo]

You can do a google search , yahoo search or rediff search but the fact does not change. I'm not bashing fundamental analysis or techniques.

By the time the financials of a company are easily available to the public , the adjustment in stock price has already taken place. This mainly happens due to insider trading or information reaching in advance to financial powerhouses. So this takes us to a wild goose chase which will make you run in circles and still not know what is going on. Its the forecasting of financials which makes the money but forecasting is easier said than done due to the number of assumptions which have to be factored in. And there is no guarantee that these assumptions wild hold true because economic conditions keep changing.

Cheers

 

[rocky01]

You can do a google search , yahoo search or rediff search but the fact does not change. I'm not bashing fundamental analysis or techniques.

By the time the financials of a company are easily available to the public , the adjustment in stock price has already taken place. This mainly happens due to insider trading or information reaching in advance to financial powerhouses. So this takes us to a wild goose chase which will make you run in circles and still not know what is going on. Its the forecasting of financials which makes the money but forecasting is easier said than done due to the number of assumptions which have to be factored in. And there is no guarantee that these assumptions wild hold true because economic conditions keep changing.

Cheers

thanks a lot my friend inangia for such good practical unlashed happning,so how we can come to true valuation of banks and finance stocks..??how to derive true value..???plzzz help.