India Inc's earnings for Q4 are out and as expected they are not great. More importantly they don't tell us much about how things might pan out going forward. So how does a Value Investor go about analysing these figures? After all, key metrics like the mean of historic PE, DE, etc. of a firm are conventionally used to forecast future profitability and gauge value.
Simply applying these metrics for the last quarter results may not provide a realistic picture of exactly where a company stands. On the one hand, companies whose earnings were badly affected may still have resources and enough future demand to survive this. Conversely, the balance sheets of other companies may not yet fully reflect the extent to which their future business is affected.
Reading the financial statements will continue to involve focussing on fundamentals even while the numbers as they stand might be misleading.
In our upcoming Value Investing webinar, an expert from Quantum Mutual Fund will discuss with Dhirendra Kumar how we need to interpret these numbers in light of the pandemic and what a value investor needs to do in this post Covid era. Click here to register.