This post is in continuation of my forecasting folly series (see here).
On Aug 19, 2011 Sharekhan put out a strong recommendation on Shiv Vani Oil stating
At the current market price, the stock is available at 3.1x its FY2013E earnings and an enterprise value (EV)/EBIDTA of 3.3x. We believe the moderation in order inflow has already been absorbed in the stock as the same has corrected by 60% in the last one year and by almost 36% in the last quarter. The stock is currently trading at attractive levels. Hence, we maintain our Buy recommendation on the stock with a price target of Rs340.
The then prevailing price was Rs.166.45.In less than 18 months, the stock has crashed to 62.6 i.e around 20% of the target price announced by Sharekhan !
Forecasting folly, anyone?
2 replies on “Forecasting Folly: Shiv Vani Oil”
Forecasting Folly! interesting thought. The problem with most analysts, Fundamentals in particular, is that they are too straight jacketed in their approach. There is dearth of creativity, originality and initiative to go that step further. This is true of Technical analyst as well. And, Sharekhan is not alone. Almost every other big ticket firang broking firms are guilty of blatantly wrong calls. I still recall the flurry of SELL calls on Tata Motors in late 2008 early 2009 when the stock was trading unadjusted at Rs.150-200 levels.
I think Sharekhan has been reco’ing this stock for many months now. Problem was the pledged shares getting sold off which resulted in the crash.