Thursday, March 5, 2009

Next BlueStar or CRISIL? - Part 2

Extending my article Next BlueStar or CRISIL?, I tried to analyze other characteristics of both these companies in 2001. The market capitalization of BlueStar in 2001 was on an average INR 70 Crore (Price INR 35) while that of CRISIL was average INR 50 Crore (Price INR 100). The companies had a P/E of 3 and 6 respectively. The companies had dividend yield of 12.85% and 6% respectively. In Part 1, we analyzed the dividend yield aspect. The other criterion that I found interesting was last 10 years profits. BlueStar made INR 145 Crore worth of profits between 1992-2001, i.e. its average Market Cap in 2001 was half its profits in the last 10 years. CRISIL mad profits of around INR 75 Crore between 1992-2001, i.e. its market cap was two thirds of the net profit the company made in last 10 years.

Remember that both the companies didn't have any debt and had pretty big moat around their businesses, which was reflected on continuous profit making business over last 10 years.

There are several companies today in BSE500 as well as BSESMALLCAP which fits this criteria. Have a look yourself.
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Unknown said...

Hi Chinmay,
Did you see any reason , why BLUEStar share is so much hammered by the MR.Market?

Chinmay said...

Hi Raibhan,

Mr. Market is in depressive mood right now. It's not differentiating between good and bad. Although I would be cautious in buying blue star, since it has grown many fold in the last 5 years. Chances are that in the next 5 years, growth would be muted.

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