Imagine a company having a share price of $100, and its EPS is negative.

If you compute the PE ratio of this company, you will get a negative multiple, which is meaningless.
Now imagine the same company having a share price of $100, but because of efficient cost-saving measures in the year, the company made a marginal profit and reported an EPS of $0.01.
The PE of the company is now 10,000x.
And all of a sudden, the shares seem to have become very expensive.
It's expensive because the PE is high. Ironically, if the company had made a loss instead of a marginal profit, you would have ignored the PE ratio and looked at other ways to value the company.
Lately, we have seen many posts highlighting the ~1500x PE ratio of Mamaearth to prove that the stock is highly overvalued.

Whether the stock is expensive or cheap is a separate discussion.
But the approach to valuing a company based only on the PE is simply an inappropriate shortcut.

#IPO
#mamaearth

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More from @KommawarSwapnil

Jan 5
Retail Investor Journey In Stock Market💹

From 10K to 1000K in a few days

Explained in 25 points

A 🧵🧵
1. People listen to other people and they come to stock markets.

2. For them mind says the stock market is where they can make passive income.
3. Many start thinking they can make 15-20K per month easily.

4. They start with swing trading and buy low price stocks.
Read 9 tweets
Jan 4
Will India 🇮🇳experience a recession or not?

1. What will happen to our investments?💹
2. What will happen to our employment?🧑‍💻
These are burning questions that each of us has!

Sadly, let me break this to you:

Today's World Bank report said that for a 100-point reduction in the US economic growth, India's economy will fall by 40 points and other developing countries' economies will fall by 150 points.
While we won't be doomed, we will still be impacted!

And here's how you can 𝐫𝐞𝐜𝐞𝐬𝐬𝐢𝐨𝐧-𝐩𝐫𝐨𝐨𝐟 𝐲𝐨𝐮𝐫 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭𝐬📈:

Get returns by investing in recession-proof industries! Look at commodities around you that you will still purchase even in a recession.
Read 8 tweets
Jan 3
Why is an inverted yield curve an indicator of a recession💹

Here's a simple way of thinking about it🔃🔃
Imagine you go to a bank to invest your money in a fixed deposit.

The bank offers you:

A 1 - Year fixed deposit (FD) at 6% per annum and,

2 - Year deposit at 4% per annum.
The long-term rate is lower than the short-term rate.

That's an inverted yield curve.

By the way, isn't this strange?
Read 8 tweets
Dec 23, 2022
Do you know the 4% rule🧵

Based on 4% rule:

For every 100000 invested, you can generate annual

Passive income of 4000 (over 300 per month).
The 4% rule allows you to withdraw 4% of your portfolio

In the first year that you're "retired" and to adjust for

Inflation going forward (for a 30-year retirement).
If in year 1 you withdraw 40,000, in year 2 you would

Safely be able to withdraw 42,000 if inflation is 5%.
Read 8 tweets
Nov 6, 2022
How I trade short straddle & short strangle for regular income

A thread 🧵🧵

Like 👍 /Retweet 🔃 for max reach
👉Basically, A short straddle is selling ATM CE and ATM PE

Sell - Nifty Nov 18100 CE
Sell - Nifty Nov 18100 CE

Combined premium is 500

Breakeven points would come at 18600-17600
👉A short strangle is selling OTM CE and OTM PE

Sell - Nifty Nov 18600 CE
Sell - Nifty Nov 17600 CE

combined premium is 140

Break even comes at 18750-17450
Read 12 tweets
Nov 5, 2022
How to get ahead of 95% of competition 👇

Be whether in life or your favourite MTM's screenshots

Retweet it if you like 🧵
Do the work which they dont

Most people put in the work when they feel like it.

It's up to you to get it done regardless of how you feel about doing it.
Be consistent

Focus on small profits, ignore MTM

Small profits × Time = success
Read 8 tweets

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