Decoding Multibagger: Avanti Feeds ltd. Share Price: 416.

Decoding Multibagger: Avanti Feeds Ltd. Share Price: 416.

Acutally answered to What is happening with the stock of Avanti Feeds, a zero debt company but still going down continuously?

We will be Decoding Multibagger: Avanti Feeds Ltd.

Avanti Feeds share price: 416.

 

Zero Debt is very small parameter in evaluating a stock’s fundamentals.

There are so many parameters that comes first.

• Profitability Ratios:

Margin%, ROCE% and ROE% are the best Profitability ratios to identify multibaggers in the stock market.

Higher the Margin%, Higher the dominance in the industry and also states that the company has created a moat.

ROCE% and ROE% indicates the efficiency of the management in using the funds available. Avanti Feeds had its ROCE% and ROE% above 40% in 4 years out of last 5 years.

No doubt that the stock that was valued at 500 Crs in 2014 was worth more than 10,000 Crs at its 52 week high.

• Price to Book Ratio:

Price to Book of Avanti Feeds is at 4.65. Below 4 is considered good for holding a stock for long term provided other Fundamentals are good. At 52 week high the Price to Book was close to 10. Until the markets are rallying, until the growth of the sector is visible, until the technicals remain intact, until the stock keeps hitting fresh 52 week highs all week, until the quarterly results are good with decent profitability ratios are intact, no one care for the Price to Book Ratio.

Avanti Feeds are in Shrimp export business and had some drop in its exports for some reason (You can google to find details). Recent quarterly results was not that good. The Margin% had dropped significantly.

No doubt people had started to sell seeing the Price to Book Ratio. Now the price to Book looks good to enter. But the technicals are not good yet. Still long term investors can continue to add the stock.

• Price to Earning Ratio:

Trailing Price to Earning Ratio of Avanti feeds is close to 15. Quality stocks like Avanti Feeds while on the bull run with good results, sector outlook and good market conditions are valued at 25x annualised recent quarterly EPS which is approx. 30x Trailing PE. 30x Trailing PE is valued close to 1000. This is where the stock was few months back until some bad quarter happens.

If the exports are back in track and if the quarterly results are good back to back, stock will be back to 1200.

• Finally Technicals:

For long term investors, I would always recommend that the stock should be above 200 dma (200 Day Moving Average) and 50 dma also be above 200 dma.

50 dma moving average of Avanti Feeds had crossed below 200 dma at 750–800. Strict stoploss below 740 would have saved another 40–45% loss in capital. No doubt they call it a Death Cross.

On a good next quarter or two, stock can retest 200 dma at 690 to 740. Above 750–800 stock will rally to 1200 provided the market rallies, sector outlook is good and the quarterly results are inline.

Conclusion:

For now, Avanti Feeds Ltd with Share price 416, is good to accumulate for long term. It can be added on every dips for a target of 700 in less than a year. Still it looks like a big bet against the moving averages. I would also recommend stock like Apex Frozon Foods as alternative to Avanti feeds based on the stock performance in last 6 months including both Fundamental and technical front.

Originally answered at: https://www.quora.com/What-is-happening-with-the-stock-of-Avanti-Feeds-a-zero-debt-company-but-still-going-down-continuously/answer/Vinoth-Kanna-26

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source https://gale.in/decoding-multibagger-avanti-feeds-share-price-416/