How to Avoid Loss and Earn Consistently in the Stock Market: An Easy-To-Understand and Practical Guide for Every Investor

by Prasenjit Paul

Any company can easily manipulate profit numbers. Further big profit doesn’t ensure real cash flow. A company may report one crore profit with negative cash flow in books. Moreover, profitable growth might be fueled by external debt. In short profit growth doesn’t ensure the quality of any business.

Note

Sales growth can’t ensure shareholders value creation. You can’t be sure how much sale is translating into cash, whether those sales are adding margin or not. Most importantly, sales numbers can also be manipulated.

2

To become a successful investor, you have to buy a great company at an attractive price. Identifying great business is just the first step of successful investing. Finding out the attractive price completes the process. In this chapter, we will discover the ways for identifying attractive valuation of any company.

Note

Valuation is like predicting the future potential of a stock and assigning a value. Whenever you are predicting future, there come lots of “if and else”. Manual intervention is must to handle such uncertainties. A single formula or a well formulated excel sheet is not sufficient enough to handle this.

Valuation Drawbacks