In case of metals, the risk is on metal prices which are vulnerable to global shifts while in case of PSU banks the fear is that NPAs could dent their growth and ROE in a big way.
A very good example is D-Mart which is already one of the most expensive retail stocks in the world with valuations at over 60 times earnings. That is because the online stock market is building in very aggressive sales growth over the next 5 years, aggressive growth in ROE and reduction in debt. Take the case of any popular company that eventually went under in the past.
But, there was obviously something that the markets in all its wisdom had sensed about Satyam, which was not obvious to most investors. However, the big worry about cash flow projections is that they are prone to the assumptions and personal biases of individuals.
Some studies suggest that it is a reliable indicator of stock price movements over the short-term. Was this article helpful? Invalid email address Submit Thank You for your feedback! Something went wrong. Please try again later. What Is A Brokerage Account?
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