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Which Shares to Buy? | PE Ratio | How to Find #IntrinsicValue of a Stock? | Fundamental Analysis - YouTube
Channel: Pushkar Raj Thakur: Business Coach
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Well today, through this video, we are going
to simplify stock market investing.
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So easy that if you were still wondering which
stock to buy. Which stock to invest in, So
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today you are going to understand a lot. Now
see that the most important information you
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are going to get in this video is that you
will understand that there is a difference
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in the price you are seeing and in the value.
Now, what does this mean? What I want to tell
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You can see the price of any stock
if you just google. If you want to see what the
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price of ITC is going on, then go to Google
with me very comfortably and write on Google
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that ITC share price and as you write ITC
share price , ₹ 205 come here, then should
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you buy it for ₹ 205. Is it cheap or is it
expensive? How will you know if I am giving
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the right price or not? Because Till now,
even if you used to go to the market to get
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vegetables, you used to bargain there. Used
to see , Used to go to different shops to
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find it cheaper here and Getting expensive
here. But how will it be understood here?
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Because ₹ 200 is written here , then I have
to give ₹ 200 . There is no other choice.
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But the Thing is You Have The Choice. There
are more than 4000 listed companies in the
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Stock market. So, whose stocks to buy and
whose to not. This is a great choice for you.
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It is not necessary, If a man is giving
mango, then Safeda mango is available at some
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places and Dussehra mango is also available
at some places and both are mango, then you
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have to choose that at one place the price
is 200 and another place the price is 50.
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so I buy the 50 one, the choice is yours.
Now on this choice, you are not buying mangoes
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here, You are putting your hard-earned money
You are investing money, and before investing
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this money. First of all, a person who invests
with knowledge, then it is called investing
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and the one who invests without knowledge
only by taking tips is called a speculator
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It is called betting and I am against betting.
If you are going to invest and you understand
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the price and value, then you will earn money
from the stock market.
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Now, how to find the value. ITC's stock that
is coming. How do we know the value of the
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company? Let's take an example. If you understand
the example, then you will be able to understand
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the valuation of even the biggest company.
Now to apply valuation.
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Every person can apply different valuation
for different companies, there can be many
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methods.
But let's take an example now. There is a
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sweet shop ,there is a sweet shop. There are
many sweets in the sweets shops here. but
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its doughnuts are very famous. Doughnuts are
so famous that people come from far to eat
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them. But, The man who was running the doughnuts
shop, who made very good goodwill . Now all
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his children are in different businesses and
they do not want to run the shop anymore.
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The man is now old and he wants to sell his
shop when he gets the buyer. Then he starts
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looking for someone to buy his shop. Now you
like that shop very much. You like their doughnuts
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very much, You have been looking at its shop
since childhood. You think someone else will
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buy. I buy it better than this. Now you give
an offer to Balaji that I will buy the shop
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from you. But at what rate do you think how
you will know that what the rates of the shop
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should be given. You get to know that the
Shop is on rent. This means that if you will
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buy this shop, you also have to give the rent.
So what money should you give, how will you
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get to know, so what do you do? You have
watched my video then, you tell Lala Ji to
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show his last 5 years of financial ITR. Now
for the moment, you see ITR, from the firm
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you are doing business. suppose, ABC is the
name of that Balushahi Shop and you see its
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ITR and you look at the last 5 years ITR and
you get to know that the Balaji, they are
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making a consistent profit. He is Making a
profit Continuously from this shop. Let's
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say he is filing the ITR of the shop of 24
lakh. That means they are getting a profit
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of 24 lakhs. Now 24 lakh means 200000 for
the month. So this shop will make you earn
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₹ 200000 for the month after deducting all
the expenses, Now this one business will earn
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₹ 200000 per month. So how much money should
that shop have? How would you know this? If
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you do not know then let us learn a new method
to calculate valuation, which we call, discounted
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cash flow method. Now, what is this discounted
cash flow method? Let's understand this very
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quickly. You will come to understand more
quickly how we will calculate the valuation
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of the shop. Well, this is the one way to
calculate valuation, there are many other ways
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So what do you see? How much income of the
year , it means you write 24 lakh rupees here,
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that the shop is earning 2400000 rupees for
the year . Now, In the denominator, you will
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take how much you want the percentage , on
which you are going to invest. For example,
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if you keep your money somewhere in the bank,
then If you keep ₹ 10000000 in the bank,
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then on 1 crore rupees, the bank is giving
you 6 percent interest, then you are getting
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₹ 600000 on 1 crore rupees. Now you will
withdraw this one crore from the bank to buy
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this shop, so how much percent return would
you like to get.
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You suppose, if I get at least a 15 percent
return, then I will withdraw my money from
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the bank. I want a 15 percent return, then
whatever you want. According to this shop,
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if you are investing, then I want the interest
of this percentage. I want this percent interest.
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Then you divide it, If you want fifteen percent
interest then divide it by 0.15 percent. If
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you divide it , then the answer will come
in before you. 16,000,000 is the valuation
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of this shop. But now when you talk to Lala
Ji ,you are earning 24 lakh from the previous
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5 years. According to me, I have seen financials,
then I can give you 16,000,000 for this Shop.
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Now, you can give 16,000,000 , but Lala Ji
should also agree to take 16,000,000 .
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Lala Ji said I would like at least ₹ 20000000.
I will not take less than this.
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Now if you think that I will have to pay two
crore rupees, then you see that 15 percent
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interest of 16,000,000 is 24 lakh rupees,
then you will have to reduce your expectation
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slightly. If this shop does not give 15%.
Even if I give 12%, then it is also fine.
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You see that now you give two crores rupees,
then here 24 lakh divide 0.12 which becomes
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2 crore rupees, then you are getting interested
according to 12 percent. so if you have bought
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something or a shop or a business according
to this ratio , then you understand that How
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much percentage of interest is coming to you,
but now suppose if Lala Ji says that I will
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give the shop at least for ₹ 50000000, then
you will say that you should keep this shop
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with you because it is better than that, I
will keep this money in the bank. There is
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no use to give to you , You are not giving
me anything , I am not getting even 6 percent.
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Better than that, I'll keep it in the bank.
So you will understand that this business
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is expensive or cheap. You understand that
business is expensive or cheap. You came to
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know about it, but it is one thing. Price
to Earnings ratio . Now this price-to-earnings
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ratio is very important. Understand this,
which we call P/E ratio. Now if you see the
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P/E ratio of any stock on the net. You can
see it very easily . See here , we were talking
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about the share of ITC, so when we were looking
at the share of ITC, you will always see their
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P/E of 19.05. so, is this company cheap or
expensive? Now you will understand because
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now you have understood the very easy way
to calculate
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P/E Ratio. Now you Bought this shop for
₹ 16000000 and you have earned 24 lakh rupees.
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So, if a shop gives you 24 lakh rupees and
you give ₹ 16,000,000 for that, then our
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P/E ratio comes to 6.6. so I calculate in
front of you, ₹ 16,000,000 divided by 24
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lakh, it is 6.6. So P/E ratio is 6.6 %. Now
you Learn to calculate it, now I tell you
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one more Thing when your P/E ratio is around
6.6 , it is an amazing ratio . This is an
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amazing ratio because From here it is known
how much to invest to Earn ₹ 1 from your
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investment . How many times rupees have to
be invested, then here you have to invest
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6.6 rupees to earn ₹ 1, so it means that
what you are putting in 6.6 years it will
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come back to you, so suppose that You had
invested 1.6 crore rupees, then you are getting
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2400000 rupees every year, then in 6.6 your
money will come back to you. But, here the
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The P/E ratio of ITC is 19.05. then almost you
are Investing ₹ 19 to earn ₹ 1, then is
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it more here? The thing is that it is much.
There are many such shares. Because many shares
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come in the news, they become popular because
they share does not sell according to its
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value, shares sell on the demand and supply.
See P/E ratio here of 677 . And because the
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P/E ratio is 677, I do not suggest Tesla
shares.
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because here you will see this share
is growing but over the period of time we
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do not know how much this stock will earn
you. Just for a while. This stock continues
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to grow. Look from where it started and immediately
it rose , but when it reached its peak , it
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came to 880 dollars and then it dropped.
You can see here that when it dropped, investors
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faced losses here because its P/E ratio is
very high. To buy it now is highly risky.
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But now how will we get to know it , we can't
calculate the intrinsic value of each company
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nor we will understand that the P/E
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the ratio is low. How will it be known? I have
told you about the screeners. You can also
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Google the stock screeners. I have also opened
one of the screeners. Take a look. You can
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open any company, Here you think I should
invest in Infosys. Click on Infosys. You will
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see it here. It will be written here that
it has been said clearly that the current
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price is more than the intrinsic value. if
you want to buy this Stock, then it is getting
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more than the intrinsic value and the dividend
is good here and the good points are also
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written here and the useless points are also
written here. But Warren Buffett says that
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you buy a share when its intrinsic value is
below. When it is below intrinsic value, it
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means the potential in the business, how
much it is earning, it is trading below it
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If its price is inflated, do not purchase
then. When its price is less than its intrinsic
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value then purchase. So, you can search the
stock of any company. Suppose you are searching for Gillette,
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you are searching for Gillette
, you want to buy a share of Gillette.
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So are you getting this share more than
its intrinsic value or you are getting it
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at a lower rate, as written here, current
prices are more than the intrinsic value.
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Again, You can see the P/E ratio here, then
the P/E ratio is ₹ 79 here. This means you
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have to invest ₹ 79 to earn ₹ 1, then
should you invest. See you have a choice. You
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have Over 4000 stocks. You have to see that
the stock which comes in the market because
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shares are not sold in the stock market. people think
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that shares are sold in the stock market that
is wrong. Actually, bids are done in the Stock
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Market . There is an auction in the stock
market. If someone is willing to pay a higher
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price for the same stock, then he will buy
that stock but that stock comes in the news.
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They come into the discussion. Those stocks
quickly become popular and people buy them
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more. But there are a lot of stocks that do
not come into the discussion,
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But they are getting less than their intrinsic
value, then you can buy them. That could be
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a right Decision and it earns you many times
returns, so now you have understood the screeners.
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You can search for a stock screener on Google.
Pick the stocks whose P/E ratio is less than
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15 according to me and if you
keep these shares in your portfolio whose
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P/E ratio is more than 15, then many more
factors should be in it. Now there are also
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videos coming for its analysis. You cannot
get complete knowledge of the stock market
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within any single video. That is impossible
because it is a vast field, but if you want
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to learn this field. Just stay on this channel
because we are doing series on financial
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education and you have to learn a lot and
because you want to learn a lot, that's why
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you are watching these videos and you are
here and now if you want to invest in the
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share market you need Demat account for it
so I will suggest you to open your Demat account
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on upstox, if you will get open it today then
you will get free digital gold and if you
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want to earn through refer and earn then upstox
is giving a very good option. If you refer
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to anyone after opening your Demat account
then you get 500 rupees so there is a link
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to upstox in the description and comment box
of this video. You can open your account by
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clicking on it and you can earn 500 rupees
from each person by referring to it . So you
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can multiply it by your friends that how much
you are going to earn if you have questions
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related to this video or you want to know
anything else ask in comments and share this
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video so that people get to know when to buy
shares especially when they are doing their
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first investment now I like this video to
give your love if you are watching this video
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see you in the next video till that time you
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