Though it is fundamentally incorrect to even compare prices of stocks, and this should never be done, yet in this study, for the purpose of educating investors, we have tried to make a comparison. If companies have to be compared to find if they are relatively cheap or expensive, investors should compare using price earning multiple (PE ratio), EV or EBITDA multiple, price to book multiple (PB ratio) or any other valuation matrix.
We have undertaken this study using data between 2010 and 2021. We selected top 2,000 shares sorted on the basis of market capitalisation and applied two filters:
Market capitalisation should be greater than Rs 100 crore. This filter ensures that we do not include those shares in our dataset which have very small market capitalisation and can be easily manipulated by the traders
Share should have return of equity (ROE) greater than 10 per cent in the year of selection as we assume that shareholders would refrain from investing in shares which do not generate minimum ROE of 10 per cent.
This story is from the March 15, 2021 edition of Dalal Street Investment Journal.
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This story is from the March 15, 2021 edition of Dalal Street Investment Journal.
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