Wednesday, November 19, 2008

When Newspapers are wrong

As a person with prospective investible money, I was eager to know about various ‘value-picks’ (hee hee, yes, you can get bamboozled once more) based on Price-to-Earnings and Price-to-Book ratios in the Indian capital markets. There was a huge hue-and-cry in the recent days (months?) that Tata Steel is quoting at a P/E of 1.0. The source of this information is none other than Economic Times, the leading pink paper has been highlighting that the company’s P/E is 1.0 (in its hard copy and not on their website). And based on that the self-proclaimed investment gurus omnipresent in my surroundings keep suggesting to buy the stock. Luckily, owing to not having any better thing to do, I checked Tata Steel’s financial statements of FY 2007-08 and for the first half of FY 2008-09 - according to which the Earnings per share (EPS) comes to Rs.67.17 (based on full year FY 07-08) and Rs.87.92 (annualized based on first half of FY 08-09). Given this and the fact that Tata Steel is quoting in the range of Rs.160-165, the P/E for the same is in the range of 1.8 to 2.4 and NOT 1. If you are one of those who look at the ratios given in Economic Times and think they are sacrosanct and proceed to invest, beware!

I presume this to be an error from Economic Times side as their website shows the actual P/E and not the one (and 1.0) appearing in their hard paper.

1 comment:

JC said...

grr!!! I got it at around 200 :(