Stock Market Classes with Pranjal Kamra - Lesson 1 | Stock Market Basics for Beginners in Hindi

Summary

In this video, Pranjal introduces fundamental analysis using a practical approach for stock market beginners. He demonstrates how to analyze stocks using the online tool, ticker.finology.in. The lesson focuses on Hindustan Unilever Limited (HUL), explaining concepts like Market Capitalization and Price-to-Earnings (PE) Ratio. Pranjal also discusses how to compare a company’s historical PE with its profit growth to determine if it’s a good investment. The video encourages viewers to follow along with future lessons and offers additional resources for those interested in deepening their investing knowledge.

Takeaways

• 📊 The video introduces a practical approach to fundamental analysis using Finology's stock analysis tool, ticker.finology.in.
• 💡 Market capitalization is the total cost required to fully buy a company, calculated by multiplying share price by the number of shares.
• 🧼 Hindustan Unilever Limited (HUL) is India's largest FMCG company, producing everyday items like soap and shampoo.
• 📉 The Price to Earnings (PE) ratio compares the price of a share to the company's earnings per share, showing how much investors are paying for each unit of profit.
• 💼 Earnings Per Share (EPS) is calculated by dividing the company’s net profit by the number of shares, helping investors understand per-share earnings.
• 🔢 The PE ratio can be used to determine if a stock is expensive or cheap based on historical PE data and current company growth rates.
• 📈 HUL’s PE ratio is currently 70, which is considered expensive compared to its historical PE ratio of 40-50, despite its recent profit growth.
• 📉 Colgate is another example given, with a PE ratio of 39, which is lower than its historical PE, indicating a potentially undervalued stock.
• 💰 Investors should compare market cap and PE ratios across different industries to make more informed decisions on where to allocate their money.
• 🧠 The video's lesson emphasizes careful research and understanding of company fundamentals before investing, encouraging viewers to continue learning through a 20-day course.

Q & A

What is the main purpose of the video?

The video aims to teach viewers how to perform fundamental stock analysis practically using a tool called ticker.finology.in, focusing on explaining key financial terms and metrics through examples.

What is market capitalization, and how is it calculated?

Market capitalization represents the total value of a company if someone were to buy 100% of it. It is calculated by multiplying the current share price by the total number of shares outstanding. For example, Hindustan Unilever's market cap is Rs-4.5 lakh crore.

What is the significance of the PE (Price to Earnings) ratio?

The PE ratio tells you how many times you are paying for a company's one-year earnings. It's calculated by dividing the share price by the earnings per share (EPS). For Hindustan Unilever, the PE ratio is 70, meaning you're paying 70 times the company's annual earnings to buy a share.

How is Earnings Per Share (EPS) determined?

EPS is calculated by dividing a company's total profit by its total number of shares. For instance, Hindustan Unilever's EPS is Rs-28, meaning each share earns Rs-28 per year.

Why is it important to compare the historical PE ratio of a company?

Comparing the historical PE ratio helps investors assess whether a company's stock is expensive or cheap compared to its past performance. For example, Hindustan Unilever’s current PE of 70 is high compared to its historical average of 40-50.

How does profit growth influence a company's PE ratio?

If a company shows consistent profit growth, the market may assign a higher PE ratio to it. Hindustan Unilever’s profit has grown by 15% in the past year, which could justify its higher PE of 70.

What is a practical use of the market cap for investors?

Market cap helps investors compare companies across industries. For example, you could choose to invest in Hindustan Unilever (Rs-4.5 lakh crore) or Infosys (Rs-2.5 lakh crore) based on your available capital.

Why does the speaker emphasize watching the entire 20-day course?

The course is designed like a math class, where each concept builds on the previous lessons. Missing videos may lead to gaps in understanding, especially since investing concepts are interconnected.

What are some other tools or services mentioned in the video for learning investing?

The speaker mentions the Academy of Value Investing, where detailed lessons on value investing are offered, and Idea Back, a model portfolio service that recommends stocks during market falls.

What should investors avoid when using the PE ratio to make decisions?

Investors should not rely solely on the PE ratio to make investment decisions. It is important to conduct further research, considering historical PE and profit growth trends before investing.