sure, only request. Plz do not take it negative. Get over metric like PE, even if use it , at least take cash flow based PE. Many times, it would make worst investments attractive n decent one unattractive. It has lot of bias, limitation n constraint. 1 must know before using it

Prediction is an addition in financial world many suffer from

Sorry, addiction

Prices fall, then, margins/topline takes beating, then, rerating normalizes, then, market loses interest, derating happens.Nothing excites - topline/margin. Market does not find quock triggers. Value emerges. Oneday triggers come, prices rise, growth comes, rerating happens

One of biggest insight I can give to long term investors - Never never invest in stock where monthly RSI14 is <50, stock attempts to cross it but stays below it. Have seen enough charts to conclude. Probabilities wont be in favor and can see multi year time correction

1/1 The statement might look simple but has lot of nuances to understand. The best way is go open charts and explore. Any session I take my focus is on taking one simple statement n bring all nuances. May be sometime will do for this too but you need to explore it yourself.

2/2 Must have some basic knowledge of time frames, longevity of sata etc etc technical analysis to consume it fully. Explore it, it's a beautiful world.

#Maithanalloys part 2 on valuation n other details will be out this weekend. In case you have not watches part 1, it's here. This is for fundamental investors.

@unseenvalue Got it sir 🙏

Paying 50-100x earnings for 'blue ocean' sectors has become normalized with promise of changing trends and immense future opportunity. Stock markets look forward, if the future opportunity is great, in most cases that 100x valuation already factors a 30x valuation in 3 years.

For investors, the question of where the buck stops is difficult to answer, because the goal post keeps changing. 30x is reasonable for one business, for another 70x is acceptable. So why not everything in between too?

Not every business captures the opportunity available. There is many a slip between the cup and the lip, as my English teacher used to say. When investors have seen valuations creep from 20x to 100x in a matter of a year or two, it is easy to to keep dancing to the same music.

But like we used to play musical chairs in childhood, someone will be left standing too. And here the rules aren't that 1 person gets eliminated at a time, hundreds get crushed at the same time. In childhood, we had a 1/X chance of being caught standing when the music stopped.

The margin of safety was high till you got down to the last 3-4 people playing the game. Similarly, your margin of safety reduces dramatically when valuation becomes irrelevant. A few months of underperformance and suddenly things don't look so rosy any more.

Why is Tasty bite at 90 PE with 15% sales growth and 20-22% ROCE.

Why not at 20-30 PE?

A private company's valuation is as much a story as anything else

"VC rounds are priced. Not valued" @Post_Market

If VCs are all about pattern-recognition but all the data has suddenly changed, how does anyone know what a company's valuation should

VALUATION MULTIPLES FROM FIRST PRINCIPLES

• There is a lot of misunderstanding & misapplication of valuation multiples, both among retail and institutional investors
• Get clarity on this by revisiting the 1st principles here

Prerequisites:
• Finance 101 knowledge

THREAD 👇

KEY CONCEPT: VALUE STAKEHOLDERS
"Beauty is in the eye of the beholder"
"Value is in the rights of the user"
So it is important to ask, "VALUE TO WHOM?"

There are 2 main types of stakeholders in a company:
1. Equity holders
2. Lenders

KEY CONCEPTS: MCAP and EV

Value to equity holders is represented by the Market Capitalization (MCAP).

Value to equity AND lenders is represented by Enterprise Value (EV):

Notice how you can convert between Enterprise Value to Market Capitalization easily

KEY CONCEPT: FCFF

Free cash flow to the firm (FCFF) = Cash flows available for distribution to both equity holders AND lenders

Related:
Free cash flow to equity (FCFE) = Cash flows available for distribution to ONLY the equity holders

We will focus on EV & FCFF in the examples

KEY CONCEPT: FUNDAMENTAL VALUE OF A COMPANY

The fundamental/intrinsic value of a company is equal to the present value of the cash flows it would generate in future.

The growing perpetuity expression of value is shown below: