Wednesday, December 28, 2016

What are the Best Tyre Stocks?

Actual Question:

Which is the better stock in tyre stocks for 1 year time horizon?


Answer:

Picture of tyre
Automobile tyre
Dear Friend!

I have evaluated tyre companies and could not find a single one suitable. The operating profit margins are low across the board. If profitability is good the liquidity and solvency ratios are poor. 

See the comparative study of four tyre companies:

Tyres
APPOLLO TYRES
MRF
PTL Enterprises
Operating Margin %
12.61%
14.60%
88.43%
Gross Profit Margin
9.76%
11.40%
86.92%
Net Profit Margin
5.03%
6.76%
42.81%
ROI
16.23%
19.87%
21.69%
Return on Long Term Funds
27.04%
27.47%
28.72%
Long terb debt/ equity
0.26
0.26
0.53
Total Debt Equity
0.32
0.40
0.53
Current Ratio
0.87
1.34
0.44
Quick Ratio
0.35
0.82
0.40
COMPANY PERFORMANCE (FOR FURTHER STUDY)
REJECTED
REJECTED
REJECTED

Finally the big question arises that when you can buy excellent companies with 50% PAT margins from other sectors at very reasonable valuations, why should one invest in tyre companies struggling with PAT margins below 10%? 

As far as your next point of investment horizon is concerned, one year is nothing. A good investor does not buy shares for one year but for the lifetime. Purchasing even a single share is like owing the business 100%. Will anybody start a new business with a time horizon of one year?
Please read the book “The Intelligent Investor” by Benjamin Graham. Learn value investing. Become rich and wealthy slowly and safely over a long time.
Suggested Further Reading:


Thank you,
With Best Regards
Anand



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