Scripscan:Jubilant Foodworks Ltd
cmp:950
BSE Code:533155
Story:To start with 6200crs market capitalization for a "pizza franchise"?Are you kidding me?I can have all my top 10 favourites at less than half of its marketcap.Jubilant foodworks has been zooming up non-stop, crossing one milestone after another.This rise had defied law of gravity and law of average.Irrational exuberance and excessive greed by the investors/speculators has helped its meteoric rise so far.I presume its even quoting at a premium to its "aka" Dominos.Check the record of dominos in the last decade it hardly made money for the investors.All valuation methods and criterias are thrown away from the basket.In this same regard,I feel comfortable in making an analogy to the tried and proven valuation methods employed to predict the scrip climate for the future. The three classical evaluation methods are business model, Price Earnings Ratio (EPS) and the prospects.Although there are a host of esoteric valuation methods developed in recent years - which are too numerous to count or describe, I would prefer to use my traditional approach to determine whether a stock is over-valued or under-valued from a historical basis.Jubilant what even if its grows 50% would have an EPS of 17 for fy12.At 950 bucks it quotes at 55 times forward.The relationship between price and value is clear, but is exceedingly difficult to measure. While price can be observed with certainty, no one can ever be sure what constitutes true value.Although it may be impossible to objectively determine current value, in the light of hindsight it is clear that price does not tend to revolve around it.Its funny to see a domestic consumption player getting so hyped when more than 75% population remains under poverty.Present momentum can take jubi foods to much much higher levels but retailers please be wary of it.Delivery stats of less than 5% speaks about the stunt which is going on the open gallery.To me its a buy only at around 450rs.Rationality may not be in vogue now but it would be someday.
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