Street Debu­tants Likely to Re­tain Premium Edge

Listed cos, de­spite rich val­u­a­tions, show po­ten­tial for su­pe­rior earn­ings growth in the long term

The Economic Times - - Companies: Pursuit Of Profit -

*re­cently listed IPOs; **since the list­ing of new play­ers

re­turns over five to ten years.

Among the re­cently listed com­pa­nies, Av­enue Su­per­marts (the owner of D’Mart) has a ro­bust busi­ness model and has been able to dou­ble its prof­its ev­ery two years. Wal­mart, too, was a very ex­pen­sive stock in the 1980s but gave over 20% com­pounded re­turns in the next ten years.

There are two rea­sons for in­vestor at­ten­tion on th­ese IPOs. Un­like the es­tab­lished play­ers, th­ese shares

providein­vestors­theop­por­tu­ni­tyto buy sub­stan­tial stakes with min­i­mum im­pact costs. Fur­ther­more, th­ese com­pa­nies hold the prom­ise of su­pe­rior earn­ings growth, given the size of their op­er­a­tions and promis­ing ex­pan­sion strate­gies.

An­a­lysts be­lieve that th­ese com­pa­nies are ex­pected to gen­er­ate su­pe­rior earn­ings growth: Hence, it makessense­for­long-ter­min­vestors to hold on to their in­vest­ments in th­ese re­cently listed shares.

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