Ready to spot a bargain ?

To do that you have to play a game with me.

Imagine you have a choice to invest in one of the four companies below, What price you would be willing to pay for below companies ?

May be profit and sales data can’t be solely used to decide, to help you  let me throw some more numbers at you

All four companies operate on decent margins also they are not commodity business as their margins are improving, While Company B is asset light but overall proxy pre-tax ROIC for all four companies is above ‘AAA’ bond yield. (In India pre-tax yield of an ‘AAA’  bond is about 9%). Also all four companies have negligible debt on their books. This is reflected  in their ROE as their long term ROE is similar to last year proxy ROIC we calculated above.

As a rational investor who is not biased you would pay relatively more for A,B & C which have better ROIC/ROE compared to D.

Right ?

What if I told you that Company B is selling 8 time of company C  (in relative sense)  you would say I must be kidding 🙂

Now let … Read the rest