No, Market didn’t overreact with Vakrangee.
Let looks at some of the figures
Vakrangee
52-week low price: 148.25
52-week high price: 515
P/E at 52 week high: 70+
Industry P/E: 21.4
Is it a multibagger?
yes, it gave 3.8 times return in just a year.
Did prices correct anytime in past 1 year?
No, there was a maximum decline of 5–10% in last 1 year.
One thing I want to question Vakrangee investors that did anyone here checked that is this the first time stock crashed more than 40%?
No, this is not the first time Vakrangee prices declined more by 48%. There have been 2 such incidences Aug 2013, Aug 2015 when Vakrangee stock crashed like hell.
When a stock can correct 48% in previous years why not this time. Clearly, Vakrangee was overvalued and it needed some trigger so that its valuation can cool off. The Mumbai mirror article gave that trigger and stock corrected by 62%.
Here is the return stock delivered from Jan 2013.
Stock managed to give 1200% return from Jan 2013 (till Jan 2018). After such a massive fall it is still a multibagger and gave 500% (9, Feb 2018).
Have a look on the bull run by Vakrangee in last year (2017)
These are times when stock corrected around than 50%
- Aug 2013
- Aug 2015
- Jan 2018
Investors who get panicked are the one who loses their money. Here, I am not recommending to invest in Vakrangee. But I am pointing out the thing which an investor should not ignore before investing in any company.
Most of the retail investor see the 1-year chart and get carried away by the bull run or the staggering return on the stock. Please do not do that. It is your hard earned money and you should invest it carefully.
Now coming to Vakrangee as an investment.
Vakrangee is working in a provides bunch of services from it Vakrangee Kendra. And each Kendra works on a franchise model where they share 30-40% of their earning with the company. Currently, the company has 44,000 + Kendra all over the country.
The market capitalization of Vakrangee: 21 Crores
Cost of each Kendra: 47 Lacs
Do you really think each Kendra was worth the value?
Investing in stock market is worth only if you are getting a company at a bargain price otherwise your wealth could be eroded at a panic situation.
Currently, SEBI has given a clean chit to Vakrangee over allegations of price and volume manipulation. Still, we think there are some issues which are still not in public domain. Therefore we would recommend to avoid such stocks.
If you are already invested in Vakrangee then do book your profits or losses above 200.
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