Hello guys, Today we will talk about share price analysis , how to find cheap and expensive share in stock market , how to do fundamental analysis of shares . so lets start are topic taking some simple examples---
- Share price analysis
- Simple method for fundamental analysis of shares
- finding cheap and expensive shares
Assume that there is shop for sale for rs 10,000 and it will give rs 2500 return every year .
Will you invest in this shop ? All of your answer is yes , because it will cover your amount of investment in 4 years and afterwards there will be profit.
But assume that there is shop for sale for rs 10,000 and it will give rs 1000 return every year.
Will you invest in this shop ? Some answers may be no , because it will take 10 years to cover only your investment.
You can relate this example with shares as if you invest in 500 rs share and it will 5rs EPS will you invest ? Or you will invest when it will give 25rs .
Let's take another situation , there is shop of rs 50,000 and it has a locker in which there are 30,000rs .And if you invest then the locker is also yours. Will you invest ? Absolutely yes , because effective cost of investment is rs 20,000.
In the same way there are some companies which have market capital of 1,00,000cr and having cash 50,000cr. It means enterprise value is 50,000 cr .
Just you have to research and find that undervalue shares .
Conclusion-
For finding out undervalue shares , I suggest to analyse consolidated data and ratios . And just remember Warren buffett investing rules before investing in shares.
Rule no 1--Don't lose your capital
Rule no 2-- Never forget Rule no 1
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