NALCO INTRINSIC VALUE BASED ON GRAHAM FORMULA

NALCO VALUATION BASED ON GRAHAM
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EARNING PER SHARE (TRAILING) :7

PE(FOR NO GROWTH COMPANY):8.5

MIN REQUIRED RATE OF RETURN :4.4%

CORPORATE BOND YIELD :7%

10 YEARS SALES GROWTH :5%
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INTRINSIC VALUE
V:
EPS*(8.5+2G)*4.4/YIELD
7*(8.5+2*5)*4.4/7=81
SO CONSIDERING MINIMUM 5 YEARS Y
GROWTH NALCO PRICE SHOULD BE 81
CMP :67
SO NALCO UNDERVALUED
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SECOND CONDITION
IF ALL FACTOR CONSTANT
AND GROWTH EXPECTED 10 PERCENT WHICH WAS LAST YEAR
THEN
=7*(8.5+2*10)*4.4/7
STOCK PRICE SHOULD BE 125
CMP 67
MEANS 100% UPSIDE

Author: Atul Singh Stock Market Analyst

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