I Ma Reversion Aug level

Man Region
It Mean company always hangover around it's Median PE

Always look long term margins of company

take aug of Margin so you got idea about Aug Margin
If Margin is higher than mean than that could be expensive buy
Company starts earn super normal earnings without in product
any changes
Mix
than always be careful because company start overearnings
Whenever company decline over earnings than Price starts to correct

Peak Valuation Peak PE t Peak earnings t Pean Margines is a

sign of zone of danger
 Even I single bad Quarter Result of bad announcement had to start
Mean Reversion Price start to fall and come at median level

Mean Reversion mean company always grow at average of their growth

E Nitty
Nitty growth is now 20 to 25
but longterm growth is 12 to 1st
If growth is rapidly increase than their is higher chance that price is
Remain flat for 1 or 2 years where no Return is generates

Ever earnings

Alkyl Amines

Overall long term margins of this company is 18 to 19 i YOY

but if we check Recent year 2022 than Margins are very expended
26 to 35 i
this is clear indication of over earnings
In Recent Quarters Margins are even 30 to 38

Management also say this margin is not sustainable

only 20 to 21 a Margin are sustainable

So now days Alkyl amines stock price is correct at 45 i

What to do
If Fundamentally company is on point and you wish to buy than
Let Margin get back to normal than buy

Always enter stock at normal margin normal earnings because

if you but at Peak margin and maggin start to decrease than
Paine start to correct that lead to huge red loss in You Portfolio

Valuation

Valuation is a game of playing odds in your favour

 Valuation All about entry
Technicals All about Exit

only this 2 thing matter in investing

I class of Valuation

i High Valuation
ii Reasonable Valuation
iii low Valuation

Put your stock in this 3

Classes and take disision
of buying

High Valuation

If you buy at high Valuation than their is very high chance that
you don't get any Return on your investment for 3 5 years
Also high chance that your portfolio can be in negative for years

Reasonable valuation

If you buy at Reasonable price than make sure company can sustain
their earnings growth

If leg Valuation
hear our expectation is varient perception will playout and that Results
Surprise all
hear we buy before Pf Resated

EI Infosys

In 2000 Infosys Pt 206 x

is
After IT bust Pf de rate to 44 x
hear their pat growed at near 35 every year but due to over valuation
Stoch give 0 Return from 2000 to 2005
 O O

PI
RE Perception I earnings

E Earnings Fundamental

Perception Depend on various factors

Market liquidity
Mushet Temperature
Interest Rates

A Refn is always same as earning growth

PAT Growth
 Es Nifty 56
Nifty Avg PE 20
Nifty earning growth is 12 to lui
Aug PE 20 12 14 t earning growth

If Nifty PE 20 and you buy

4 4069 Avg Return will be 12 tux

It Nifty PE 23 and you buy

4 Your Return will be 10 12 i

If Nifty PE More than 25 and you buy

4 You Return will be only 6 8 i

If Nifty PE 16 and you buy

Weath creation

Ag Slosh Price CAR drive fam things

D EPS Growth CAGR Earnings or PAT Growth AAR

2 PE Growth chap Pf Ry Rating

Due Pont of Stoch Paine CAUR

Poise EPS t PE

Easing t Meastfgs

by Duo pont Analysis you can get idea about Price and how value
created
You can get idea that this Price CAGR Comes from which thing
It Comes from earning growth AGR or Comes from Pf Re Putin

1 Eating Growth CAIR If company earnings grow at 20 CAQR than

you atleast get 204 CAUR on your Investment

Hear valuation comes in to picture

I BE Growth CAUL
If YOU buy stock at high than avg PE than due
Pf Re eating to high Pf buying your CARR Return will be even less
than 20
 If you buy stock at Aug PE than your
will be 20 x minimum Return
Also get extra Return du to PE

Ty If you buy stock at lower Pf than you minimum get

20 t CAGR Return t you also get extra more Return
because Pf is lower and it will be Re Rate

E
Assume company will grow at 20 i CAGR
4 EPS crow will be 20 i CAUR
PE is also Resonable Aug I 15 to 20

Stock price will be

EPS PE
20 8 i
28 I 30 I CAUR

Why PE take 8
because hear now Pf is Reasonable which is 15 to 20
if in Future we sell at 40 to 60 Pf because we buy at Reasonable Price
and sell at high Paine than growth of PE From 15 20 to 40 60
in let suppose 8 years than growth PE CAR will be

Le example

Pay Finance
 M Cup share prise growed at 69.5 i CAGR

2019

EPS
pp F.jo 6933gg EPS
Pf
Growth
Growth
34.3
20 X

M Cap Growth 69.5 x

Here stock price grow at 69.5 i CAUR because EPS Grow at

35 and buying stock at 10 PE chip valuation

Now If you buy stock at 20 Pf high Valuation and EPS

Grow at same 35 i than Stoch Return is lower

2
Eps
pf
6.5
121
20
69.3
43.68
Epp Growth

YYIa.in
34.3 i

so oss

Here you can see From Total Shar price CAQR 10 Years
comes from EPS Growth
I Jing Yan Pf Growth PF Re Rating

Here Wecan predest EPS Growth by Fundamental Analysis

But if you buy at high valuation than your char Return can
be less than Earnings growth
 Here we can see last 6 year EPS growth is 55
but due to high valuation PE CAKR de growth and that
lead deisease growth in share price growth

but still Varunis best stock because as an investor

beverages
our expectation is get 20 i CAUR
4 this stock EPS growth can able to give 20 Retuse even
in higher valuation you can get 20 Retusen even Pf
de Rate

I Hear listed every stock's which Cheat huge wreath is not only
they earning growth was very high but also because of they
because
Was also at lower Valuation

Always Remember a Price always grow at earning growth

If you buy stock at high valuation higher than avg than your
Return always been lower than earning growth

If you buy stock at Reasonable Valuation Aug than your Return

will be at least minimum same as earning growth t you
can get extra Return if PE grow

If business is Wonderful than Avg Pf always grow like

s AUG Pf grow
20

no

If you buy
stock at low valuation low than aug than you
can get minimum Return same as earning growth t you get
extra huge Return on Pf Re rating from lower than Avey t
also get extra Return if Avg PE grow

Dy Pont Analysis data

Tijorifinance Financials Growth Table

III Most Important Things In being stood

D Earning have to Grow
2 buy at low valuation I With Creation

Only Earning growth is in our hand Choose high earning growth storks
We can not do anything about Price We just do 1 thing buy at
lower valuation

IEEnd Lose PI
Always measure company with Core Pf

1 If other income is high than Subtract it from PAT than caliulate

PE Cosy PE
2 It PAT Increase drastically than find the reason behind it and
subtract that amount from PAT and calculate PE

If one of Quester Year PAT increase due to other reason

which is not related to operation than subtract it from PAT

Anti industry

Dec 2021 Quarter has PAT 773

but Actual PAT is 150

Also March 2022 has 194 PAT

but actual PAT is different
contrast
PAT increase becaus company
g g is break and get their money back

Reat PAT of year is Around 600 Cr

their Pharma business also de merge which generate 100 is

Total PAT 600 100

500 a

At Sep 2022 Pf was 15 x

but Real PE is 38 x because core PAT changes
 When PE doesn't work

I Wha canings have a one off

It mean if company's PAT is artificially increased due to other
things than PE may be Reflasted decrease

Other things Add exceptional item in PAT

Add other income in PAT

You have to calculate Core PAT than Calculate PE

se Aarti Industry

2 When assessing Turnyounds

If was loss making than PE Could not Calculate

Company
If you think that loss making company can turn in to profit making
Company than you can buy that Company without assessing Pf

Company sitting In top of Orating leverage

It mean Company complete their capex and all assets are commercialized
but Company can not generate sales growth as of now
 Here all assets are complete and commercialized but sale growth not
come due to Various Reasons like approval problem because of
this deprivation starts increase that lead decrease PAT
this senario Plf is not Valid matrix P CF is valid
because I Depsiciation 7 I PAT T PE
When company start to genesat sales on now assets than 1 PAT T
Whish lead to Mean Reversion of PE

B Ead PI
Forward
Pt affterealings

Erect Valuation Ratios for business

D RE I PEI i Generally use

a Asset heavy
EI EBITDA is
4 Toomuch Fixed
business
assets

ited I dilation 1 PAT T PE Artificially

3
Pff Companies
n
which generate high Cashflow of
n are also asset heavy business
FCF

U
Plays FMCG

5
PIB Financial Sectors