Comments on Unfair Value: The real support levels

Focusing only on the financial numbers while ignor...

2009-06-07T11:18:50.573-07:00

Focusing only on the financial numbers while ignoring the business analysis is
as big a mistake as focusing only on the business and buying a stock of a good
company without looking at its valuation.

If you search the database of Indian companies with the financial ratios better
than Chennai Petro, you will find hundreds of companies? Why should you buy this
one, not the other ones?

The answer has to come from business analysis. You got to start reading about
operating economics of its business and the competitive strengths of this
company.

Also when you check net current assets, you need to subtract the debt from it
because if the company were to be liquidated today, you will have to pay the
creditors before you can get any money out as a shareholder.

Regards
Kamlesh

Hello Kamalesh, As I have been a regular reader o...

2009-06-04T19:02:56.200-07:00

Hello Kamalesh,

As I have been a regular reader of your blog, I tried to strat analyzing a company based on the support levels you mentioned. Please tell me if I am proceeding in the right direction?

It is Chennai Petroleum Limited.
I share is trading at 193 Rs as of 4/6/09.
Its book value is 232,66. So, trading below the book value.
Its Net assest per share value is 165,18. So, trading a bit higher than that.
Its earning yield is 0,223. Taking the average of last 5 years earnings, including various cylcles of oil prices.
Its dividend yield is 9%, slightly higher than what normal fixed deposits would offer me today.
Its debt to equity ratio is 0.7.

Based upon these support levels, I consider this stock to do well in long term.

Kind guide me if I am on the right path to analyze a stock?

Many Thanks upfront!

Vamsi