This guy is like an underdog RU-vidr . He makes best videos on investing but very few people know about him. Let’s make him famous. Let’s share , comment and like his videos so that he gets his due.
Information which 90% of so called stock advisors on youtube can never talk about. Brilliant content!! your Intrinsic value of subscribers is definitely in Millions, The day will come!
Amazing Shankar. Not even my finance prof had explained this to me so clearly. Great job and this is possibly the best video on intrinsic value calculation.
This is one of the best videos of Stock valuation that i have come across. It takes Warren buffett's methodology (DCF) and puts it in a way where a layman investor like me can understand.
This method of finding the intrinsic value of a stock sounds like the method used by Warren Buffett. If we analyze stocks like him and act like him we can earn huge profits. Great analysis. Thank you very much.
Just to not patronize, yet state the truth, I have been watching your videos (and taking notes) ever since you were on ETMoney..!! And a lot of my learnings are attributed to these videos. Many thanks. :D
Awesome.Will need to see it a few times more before i get a grasp.I intend practicing it,let's hope I finally do manage to work it out.Thanks.Grateful.Very educative.
My pleasure 😊 .. please do put it to use. It's a bit tough initially but once one gets used to the process, it offers a big layer of comfort before investing
Most welcome 😊 .. the process is nothing but how we think - in reverse. Look at it this way, we buy a house at say, 50 lakhs .. and the assumption is that in 5 years, this will be worth a crore. DCF just reverses this thought i.e. OK, this company will deliver 1 crore after 5 years, what is it worth today? That's it, it's that simple!
Others are influencers but you are a real teacher sir thankyou very very much sir. But sir can you please make a detailed video on economic moats and how to find companies with very big economic moats
This is the simplest and most effective explanation of DCF. In the oast I followed the EV/EBITDA, P/E and P/B models, especially the first one. Never tried the DCF as I felt it too complicated. I agree with you on the DDM. Not a bog fan of it though. Of late, I am not doing much valuation as I am predominantly a momentim investor. But, looking to do valuations again for a few stocks. This video will definitely help me.
@Shakar - I have been trying to learn how to calculate Intrinsic value. Followed the dean of valuation - Prof. Damodaran also. It's a fancy concept and unlike many other financial ratios and numbers, it's quite complicated and has lots of subjectivity to it. In your video you have explained it with a great ease. Thank you so much. I have a question though on Infosys' intrinsic value. Infosys traded at 854 in Covid times (Jun'20). It will need to shed 40% to get back to that. Also, it's imp to note - Infosys is trading at historically lower than five-year median PE. So this gets confusing. As per Intrinsic value - Infosys is not a good buy. However, as per latest IT sector down trend and low PE - Infosys is a good buy. What am I missing?
Thank you very much. This intrinsic value calculations are based on my assumptions. Owners earning growth rate, terminal value multiplier, discount rate and the margin of safety were all crucial assumptions. Understandably, on an excel sheet, it is easy to show that even 2000 rupees is a steal for Infosys. Now it's upto you and what you believe it. The point on Infosys trading at historically lower than the 5-year median PE is an interesting point you raise. Many investors will say "Oh wow! It's low" but over time, I've forced myself to ask "Why is it low? Is it because the growth rate has stalled? Are there headwinds? What is the management saying? etc."
As usual woww ! Great video Shankar , at some places sounded like listening to Einstein relativity theory .But it's so good .will try to do the same calculation for Wipro !
Thanks. A rough and dirty way of doing it is to take the current mcap and dividing it by the 5 year price returns. For example - if a company X is at 10000 crore mcap today and over the last 5 years, it has given a share price return of 20% per year. Then --- 10000 divided by (1+20%) raised to the power 5. This will come to 4,018 crores
Hi shankar. Assuming all assumttions of CF growth, terminal value multiplier turn out to be correct and assune you baught at the price available by DCF method ( without margin of safety) and you hold for 10 years. What return will you earn - CF growth %age? Or Discount rate-12% or something entirely different. ( I'm trying to understand what's the benefit of doing all this future guessing exercise)
Hey Shankar, Nicely explained!! Appreciate your efforts. Wondering if you have any plans of doing a video on Aswath Damodaran's way of finding an Intrinsic Value of a Stock ??
Hi from Muscat Oman.. I am totally impressed with your clarity in presentation. Would like to Seek your service in managing portfolio. How to Reach you?
Thank you very much for your kind appreciation 🙌 . Apologies, I'm not into fund management nor into advisory for now. I'm keen on focussing on education; that's where I am at peace and I think its something I can do well at. If I were to pick up 1-on-1 consultations in the future, then I'll certainly keep my community informed through a community post.
Sir, I seek clarification regarding the Cash Flow Discounted method. Some experts deduct after-tax operating cash and then subtract capital expenditure. In your calculation, you consider pre-tax cash for evaluation. Which method do you find more appropriate? Thank you.
Hi Shankar. If you are computing Enterprise Value (Value available to both the debt and equity holders of the company) using the DCF and thus discounting it by the WACC (weighted cost of capital for both debt and equity holders) then in in the final step shouldnt you deduct debt as well in arriving at the equity value? Enterprise value + Cash/Marketable securities - Debt = Equity value
Yes, you are right. Since Infosys barely has debts & what is has is lease obligations, I ignored it. Perhaps I should have taken a different example and clarified the difference between levered and unlevered DCF. So what I did was to find the enterprise value. From here, the debt gets deducted to arrive at the equity value which is then matched with the market cap. So in this case, it will be 5,12,000 crores minus 8,300 crores giving us 5,03,700 crores or 1,202 rupees per share
Thank you for this video. Request you to please answer my question, 2 companies of the same sector, similar PE, ROCE, PEG, Promoter holding etc. BUT the 1st company has FV of 10 and the 2nd has FV of 1. Which one would you choose?
@@shankarnath I thought you would be the right person to ask considering your acumen. Had this query in my mind for some time. Thank you once again for the reply and always look forward to your videos 👍
Hi Shankar, tried following this with few stocks, but did not get expected output. What happens if the profit growth rate is more than the discount rate in the denominator for Divident Discount Model (like in case of HDFC Bank)? Similarly, what happens if a company is not generating significant cash, like Avenue Supermart? How would cash flow analysis work for such companies?
Hello Manish: 1. The dividend discount model has its cons. Please read this document at leisure for more insights on it: pages.stern.nyu.edu/~adamodar/pdfiles/valn2ed/ch13.pdf 2. I think you mean free cash flow because DMart does have growing & positive operating cash flows but since they are growing, they spend a lot on growth & working capex. In scenarios of you projecting negative FCF (or negative cashflow in other firms) in the future, the result of the DCF would be a negative total present value. You have two options - a) project the FCF in the future such that they eventually turn positive. This will happen at some point for Dmart also and as an analyst, you have determine when b) discard DCF for evaluating Dmart (the same hammer can't be used to shape an ivory statuette and for breaking a mountain)
Your video is thoughtful and learned something new . But i dont see market capitalization data for pharma sector on their annual report. How to find it?
@@shankarnath I am using your excel sheet for DCF model which you explains infosys so i tried to do same for natco pharma. But i don't see market capitalization details in annual report which is given in infosys report.
@@vinothraj7617 Maybe you can connect with the Investor Relations team at Natco Pharma (details are available in company website) for the same. This takes time so personally, I pull out the no. of shares data as on 31st of March of different years (available in annual report) and multiply it with share price on that day (available on screener.in)
What I wonder regarding financial statements, can't they be standardized? Can Sebi not enforce a schema on companies to put these number into, this way it would be trivial for computing the indicators for retail investors? May be it's already happening, just trying to understand if such things exist already.
Because that will only give the cashflow for only one year ahead of the present year so that is why we calculated the FCF on the basis of the assumed growth rate.
