Company | Market Cap (INR Crore) | OCF(FY09) | OCF(5 year average) | Market Cap/OCF | Market Cap/5 year average OCF |
---|---|---|---|---|---|
Cipla | 26K | 375 | 315 | 70 | 82.5 |
Ranbaxy | 19K | -600 | 185 | NA | 103 |
Dr Reddy's | 19K | 480 | 450 | 40 | 42.5 |
Glaxo | 14K | 320 | 288 | 43.75 | 48.5 |
Even the ones that look cheap like Sun Pharma and Lupin are trading at more than 25 times their operating cash flow of FY2009. And since these companies have grown at a rapid pace in the last five years, the P/OCF of average will be much higher. The last five years were quite tough for many of the above companies and may not be the same in the future. But aren't investors paying too much for future?
4 comments:
hi sir,
could give us an article how to analyse a company fundamentally
what are the aspects that should taken into consuderation
regards
rajamani
You are truly amazing. I was wondering how I missed your blog despite a techie guy.
one small doubt. operating cash flow only tells the cash position in that year. If more money leaves for investing activity then your calculations are wrong. The best measure is operating profit which buffet uses very frequently. Am I missing something here?
Thnaks
Anil
@anil
Operating cash flow is taken from moneycontrol. See for Cipla here
http://www.moneycontrol.com/financials/cipla/cash-flow/C
Basically the net current assets of Cipla increased a lot between 2004 and 2009 due to inventory and sundry debtors as can be seen here.
http://www.moneycontrol.com/financials/cipla/balance-sheet/C
Increase in working capital is a negative for operating cash flow and that's why ocf is very low for all the companies. But in 2010, the operating cash flow was as much as net profit.
Buffett uses owner earnings or something like (net profit - maintenance expenses + depreciation).
Chinmay
There is no bubble in Large cap Pharma.
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