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Fundamental Analysis Lecture with Pranjal

Jul 3, 2024

Fundamental Analysis Lecture with Pranjal

Introduction

  • Curfew Classes: Educational sessions on investing
  • Focus on fundamental analysis using Finology Ticker: ticker.finology.in
  • Plan: Simple videos initially, increasing in complexity over time

Overview of Hindustan Unilever Limited (HUL)

  • FMCG Company: Fast-Moving Consumer Goods
  • Examples: Soap, Shampoo, Detergent
  • Market Cap: Rs. 4.5 lakh crore

Key Concepts

Market Capitalization

  • Definition: Total value to buy 100% of a company
  • HUL Market Cap: Rs. 4.5 lakh crore
  • Formula: Share price x Number of shares
  • Example: Rs. 2190 (share price) x 216 crore shares

PE Ratio (Price to Earnings Ratio)

  • PE Ratio Definition: Price you pay for one share relative to its one-year earnings
  • Important Terms:
    • Price (P): Current share price
    • Earnings (E): Earnings per share (EPS)

Earnings Per Share (EPS)

  • EPS Definition: Net profit divided by the number of shares
  • Example: HUL's EPS is Rs. 28
  • PE Formula: Share price ÷ EPS

Analyzing PE Ratio

  • HUL's PE Ratio Example: Rs. 2190 (share price) ÷ Rs. 28 (EPS) = 70 PE
  • Historical PE Comparison: Compare current PE with historical PE to gauge company's valuation
  • Profit Growth: Assess historical profit growth to justify PE changes

Practical Example: HUL

  • Current PE Ratio: 70
  • Profit Growth:
    • Last 1 year: 15%
    • Last 3 years: 13%
    • Last 5 years: 10%
  • Historical PE Trends: Historically ranged from 27 to 50 PE, currently at 70 PE

Practical Example: Colgate

  • Current PE Ratio: 39
  • Historical PE Trends: Ranged from 40 to 50 PE
  • Profit Growth:
    • Last 1 year: 15%
    • Last 3 years: 10%
    • Last 5 years: 7%
  • Conclusion: Interest grows if PE is lower than historical average despite strong performance

Market Cap Insight

  • Compare market caps of companies across industries
  • Example: Deciding between HUL (FMCG) and Infosys (IT)

Conclusion

  • Understand fundamental analysis concepts like Market Cap, PE Ratio, and EPS
  • Compare figures historically to make informed decisions
  • Upcoming Classes: Build on concepts learned

Additional Resources

  • Academy of Value Investing: Detailed course on value investing
  • Model Portfolio Service - Idea Back: Recommended stocks and model portfolio
  • Ticker Account: Create your account to practice fundamental analysis

See you in the next class at 7 PM!

Full transcript