Saturday, March 21, 2009

Are these stocks worth investing?

I was looking at the distress sale going on in the stock market in IT space. It is true that most value investors would avoid IT sector stocks since their business model is difficult to understand. After the Satyam fraud, even the books of many IT companies are difficult to trust upon. Still I found that some of the IT companies are available at throwaway prices. Here is the list:









NameMarket Cap (INR Crore)Net Current AssetsProfits of Last 10 years
CMC430144465
D-Link11548220
Geometric9563210
KPIT Cummins20075240
Nucleus15042210
Polaris460250600


If you consider buying the whole company and assume that the companies will make the same profits over the next ten years that they have done over the last ten years, which is very conservative estimate, then you can get more earnings than what you get in PPF in some of these businesses. In PPF, you get 8% compounded annually, i.e. INR 1.16 on INR 1 invested in 10 years. On Polaris you get 600/460=1.3, on Nucleus you get 210/150=1.4, on KPIT cummins you get 240/200=1.2, on Geometric you get, 210/95=2.21, on D-Link you get 220/115=1.91. If CMC gets merged to TCS with a swap ratio of 1:1, you get 1.8 times your money at today's prices.
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2 comments:

Amit said...

A quick query... where do you get 10 year earnings from?

I mean do all these companies provide these in their annual reports or is there any place one can look up 10 year eps data from.

Chinmay said...

Hi Amit,

You can see company's annual report on their website or at http://sebiedifar.nic.in/

In annual report you generally get 5 years data. So Annual report of 2008 and 2003 can give you last 10 years results.

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