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Exacerbating the pain, corporate default spreads rose during the course of 2022: While default spreads rose across ratings classes, the rise was much more pronounced for the lowest ratings classes, part of a bigger story about risk capital that spilled across markets and asset classes.
For example, I have seen it asserted that a stock that trades at less than bookvalue is cheap or that a stock that trades at more than twenty times EBITDA is expensive. I do report on a few market-wide data items especially on riskpremiums for both equity and debt. Standard deviation in stock price 2.
Consider, for instance, an investor who picks stocks based upon price to book ratios, who finds a stock trading at a price to book ratio of 1.5. buy stocks that trade at less than bookvalue or trade at PEG ratios less than one) for individual stocks.
The second is the cost of capital, a number that most valuation classes and books (including mine) belabor to the point of diminishing returns. Finally, dismissing Zomato as an investment, just because it does not make money now, or fails to meet some conventional value tests on pricing (PE, Price to Book), is investing malpractice.
With these characteristics, the accounting balance sheets for these companies will be identical right after they start up, and the bookvalue of equity will be $60 million in each company. The first is that if markets are efficient, the price to book ratios will reflect the quality of these companies.
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