1,800x earnings: Is the stock worth paying for?

Summary: Titan's 22-year earnings growth was so strong that even paying 1,800 times FY04 earnings would still have delivered a 12 per cent annual return, but this piece pairs that with five stocks where even modest prices proved too high, showing that price and growth durability are two sides of the same question, only one of which can be checked in advance.

Summary: Titan's 22-year earnings growth was so strong that even paying 1,800 times FY04 earnings would still have delivered a 12 per cent annual return, but this piece pairs that with five stocks where even modest prices proved too high, showing that price and growth durability are two sides of the same question, only one of which can be checked in advance. Twenty-two years ago, Titan Company traded at a P/E of 30, a full but unremarkable price for its time. The maths today says an investor could have paid nearly 1,800 times earnings back then, not 30 and still earned a 12 per cent annual return. The number reads like a typo. It is not. Here is how that number gets built. Take Titan’s actual earnings per share in FY04 and in FY26, so the growth is already known, not guessed. Take the price the market pays for the stock today, so the destination is fixed. Then ask one question: What price, paid back in FY04, would have turned that starting point into that ending point at exactly 12 per cent a year, roughly what the Nifty 50 has compounded over the long term? Divide that price by the FY04 earnings, and out comes the P/E an investor could have justified paying then. We ran this exercise across listed Indian companies wi