Hi Memebers
I need some help on valuation of companies in INDIA. I was going through an article and i saw that the earnings per share for RNRL is 10 paisa for the previous quater. Since then the stock price of RNRL has moved up by more than Rs 7 which is 70 times the earnings per share. If RNRL plans to close down would every investor get back Rs 46 (its current value) as of today ? Im sure the answer to this is NO. But my question is a little deeper. To my mind we would not get back even Rs 10 then how can the company stock be valued at Rs 47 and people also expect it to go up to 200 plus when it took them 1 quater to make 10 paisa per share. This is more of a general question RNRL is just an example.
Consider a Software company XYZ. It has a cash reserve of 30 million. Its got two business that have been giving it profit of Rs. 20 million each per year. Considering that it would improve by say 25% in the coming year we could think of a valuation of Rs 30 million + Rs 40 million + 25% (40 million) = 80 million. How do people end up having market caps of 500 million for such companies ?
The US subprime mortgage meltdown has shaved off Rs 2,40,000 crore market capitalisation on the Bombay Stock Exchange in fourteen sessions.
Does that mean that just 14 sessions back our companies were worth 240 thousand crore more than today ?
Someone please help me learn how to calculate the valuation of a company?
- Adil Saleem
ps: i have no holdings as of now and waiting for a good technical movement for entry.
I need some help on valuation of companies in INDIA. I was going through an article and i saw that the earnings per share for RNRL is 10 paisa for the previous quater. Since then the stock price of RNRL has moved up by more than Rs 7 which is 70 times the earnings per share. If RNRL plans to close down would every investor get back Rs 46 (its current value) as of today ? Im sure the answer to this is NO. But my question is a little deeper. To my mind we would not get back even Rs 10 then how can the company stock be valued at Rs 47 and people also expect it to go up to 200 plus when it took them 1 quater to make 10 paisa per share. This is more of a general question RNRL is just an example.
Consider a Software company XYZ. It has a cash reserve of 30 million. Its got two business that have been giving it profit of Rs. 20 million each per year. Considering that it would improve by say 25% in the coming year we could think of a valuation of Rs 30 million + Rs 40 million + 25% (40 million) = 80 million. How do people end up having market caps of 500 million for such companies ?
The US subprime mortgage meltdown has shaved off Rs 2,40,000 crore market capitalisation on the Bombay Stock Exchange in fourteen sessions.
Does that mean that just 14 sessions back our companies were worth 240 thousand crore more than today ?
Someone please help me learn how to calculate the valuation of a company?
- Adil Saleem
ps: i have no holdings as of now and waiting for a good technical movement for entry.