Return on Equity (ROE) – Understanding & Interpretation of The Ratio

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What is Return on Equity (ROE)? It is a financial ratio that is calculated by dividing net profit (PAT) by the total shareholder’s funds (Net Worth – NW) of a company. ROE is the measure of the company’s efficiency that highlights how well the company is using shareholder’s capital to yield net profits. Suppose there […]

Free Cash Flow (FCF) – Formula, Calculation & Types

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Free cash flow (FCF) is more valuable than the net profit (PAT) of a company. We will see how. To understand it, we will use a hypothetical example and calculate the free cash flow for an individual. Suppose you won a prize in a car rally. The gift is payable in cash worth Rs.5,00,000. But […]

Signs of A Market Crash – Look Our For These Warning Indicators

Value investors keep looking at the signs of a market crash. Why? Because they make more money during a crash than in normal times. It will not be an overstatement that they crave for the index to crash. Why? Because it is the time to buy the best shares. The indices move in cycles. There […]

Indian Stock Market Is Overvalued [2021]: How Laymen Can Verify The Valuation?

There is no doubt that Nifty and Sensex are trading at their all-time highs. For the last two days, from 19-Oct’21, the market is showing signs of correction. In days, the Nifty50 has fallen by about 2.5%. So, our stock market is overvalued or undervalued? People are waiting for a sizeable correction of the market. […]

Present Value Concept: How To Use It In Evaluating Investments?

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What is the present value concept? Suppose a person invested Rs.1.0 crore in a real estate property. It will be a good investment if he gets back his invested amount, with some surplus (see this example). A simple example. Suppose, the investment (Rs.1.0 Crore) was made today. If the person gets back Rs.1.2 Crore after […]

How To Calculate The Intrinsic Value In Excel Like A Pro [Beginners]

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We’ve built an Excel-based tool that can analyze stocks. But how beginners can calculate the intrinsic value in excel on their own? In this article, I’ll discuss a procedure to do it. It is simple, and even beginners can practice it. There are limitations of estimating intrinsic value using this method. But experts say that using some valuation method is better than investing blindly […]

The Margin Of Safety: How To Apply The Theory During Stocks Purchase?

People who know about value investing will be familiar with the term called “margin of safety”. Generally, people prefer to apply a rule of thumb when it comes to the margin of safety. A stock trading at two-third of its estimated intrinsic value can be said to be available at a good margin of safety. […]

Discounted Cash Flow (DCF): How to use it for Stock Valuation?

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[Updated] Discounted Cash Flow (DCF) method is a better way of intrinsic value calculation. The DCF model is derived from a concept called Net Present Value (NPV). Why Intrinsic Value is required? Because based on it, one can judge if the stock is fairly priced or not. DCF method is not an easy way of doing price […]

How To Identify Moat Companies – Having Strong Competitive Advantage

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In our series of articles about stock basics, we talked about the economic moat of a company. A wider Moat gives an edge to the company over their rivals. Such companies operate with high margins. But how to identify moat companies? In our previous article, we’ve talked mainly about the qualitative factors that give moat to companies. But it is also […]

Analysis of Stocks Having Less Than Ten Years Financial Data [Mrs. Bector Food]

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Analysis of stocks that are new in the market is not so simple. What is the problem? The analyst must make some assumptions. For the company which has 10-year records, the assumptions-list is much shorter.  Recently I met a friend who enquired me about the recent IPO (in Dec’2020) of Mrs. Bector Food. Someone advised […]