Move Over P/E, Make Way for the PEG

[Einstein]

@ rocketsingh,

WOuld you please take a look at Bajaj-Auto?? im thinking of making a long term investment in it. rupee is supporting it export wise..

 

[Einstein]

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[Einstein]

For those who still believe low PE means cheap, here is a SOLID example.

https://www.youtube.com/watch?v=Z2R7sy-77q0

in the end buffet himself said that he bough geikko even if it is trading at high multiples (classic graham stocks).. common sense wins again!!

 

[roketsingh]

@ rocketsingh,

WOuld you please take a look at Bajaj-Auto?? im thinking of making a long term investment in it. rupee is supporting it export wise..

Could not reply earlier I had PC trouble.

Bajaj Auto looks good play for long term.

I have not read the annual reports, so my analysis is primarily focuses on what numbers tell me.

From the IS: one can get the idea that EBITDA margins have gone down compared to last couple of years but with better economy projections these are bound to increase. Net profit and sales are relatively flat and to see if this is a good company or not we need to look at the other companies in this sector which could be TVS/Mahindra.

Currently it is trading at ~20x LTM and is debt free which work in Bajaj Auto's favor.

From the BS, it looks attractive as its cash collection cycle is really good, it is collecting in ~15 days while payments are made after more than 40+ days.

One bad thing that comes out of these numbers is that company's inventory levels are gone down which means two things either company has really become efficient or it expects sluggish sales in next few qtrs. I believe latter is true.

I would wait for few more qtrs to see where company stands in terms of FCF. It has come down drastically largely because of increase in working capital. For me this is the most important criterion.


Now coming back to original question of exchange rate, it depends. I would look at the net position because company imports are also impacted by exchange rate but it has hedged its position at Rs. 60. I will look at it more closely in next weeks and see what I come up with.

 

[Einstein]

very nice rocket ji upto my expectation . bty i think its trading at a huge discount to its intrinsic worth and most of the competitors are either expensive or are bad businesses. its in my list to keep track on, specially after tapering.

 

[Einstein]

Rocketji, need your opinion on some other stock. let me know if you're still active in TJ

 

[roketsingh]

I am still active, did not get time to visit TJ in past few days.

Lets move all the stock specific details to either your or amit's thread.

 

[RisingSun361]

Hello everyone, from the United States. Just thought I would mention Peter Lynch's use of what he calls the yield-adjusted PEG ratio. It is calculated as follows:

(P/E ratio) / (EPS growth + Dividend yield)

Please note that EPS growth is a trailing figure. This can be verified in his book One Up On Wall Street.

 

[Einstein]

PEG ratios don't work.