Thursday, July 22, 2010

Is FMCG a bubble?

I have written about bubble forming in Large Cap Pharma in the past. Is the same happening with FMCG? Let's look at the following table and see:

ShareMarket Cap (INR Cr)TTM P/EP/E of 5 Year Average EPSP/E of 10 Year Average EPS
Nestle2843242.554.887.6
Dabur181403652.680.6
Colgate1155025.536.868.1
Marico759532.848.171
Asian Paints2413532.45988.9

I have to remind investors here about the valuation of companies with a lot of enthusiasm at the peak of the Sensex level in January 2008. Almost all companies are appearing near the bubble territory. At the bottom in April 2003/2004, following were the valuations:

* bottomed in April 2004
ShareMarket Cap (INR Cr)TTM P/EP/E of 5 Year Average EPS
Nestle*482118.3228.2
Dabur105511.614.6
Colgate*163018.425.6
Asian Paints20851519.85

Be cautious!!!

Buying a neglected and therefore undervalued issue for profit generally proves a protracted and patience-trying experience. And selling short a too popular and therefore overvalued issue is apt to be a test not only of one’s courage and stamina but also of the depth of one’s pocketbook. - Benjamin Graham
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3 comments:

Mahesh said...

Wonder Full Analysis.

I subscribed your RSS last year and following your principles.

Very well written.

Ppl want india to grow @ more then 20% YoY but india has grown max 18% and will continue to grow max 20%.

If expectation didnt met stock collapse.

Most of the stock quoting @ P/E way beyond industrial P/E which is scary to me :)

Thank you

Mahesh said...

Wonder Full Analysis.

I subscribed your RSS last year and following your principles.

Very well written.

Ppl want india to grow @ more then 20% YoY but india has grown max 18% and will continue to grow max 20%.

If expectation didnt met stock collapse.

Most of the stock quoting @ P/E way beyond industrial P/E which is scary to me :)

Thank you

rajsmusings said...

Hi Mahesh,

Wonderful blog. Stumbled upon it today only and have already read close 20 posts.

I have one generic suggestion. Can you think of increasing the font size of your posts text. They are very small and li'l straining to the eyes for continuous reading.
Hope to be a regular reader of your blog.
Regards
Raja

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