Wipro stock Valuation and intrinsic fair value price

Back in April 2013, share price of Wipro crashed from 450 Rs and in June it touched a low of 325 Rs. The main reason given by stock market experts on TV for the crash was the de-merger of its non IT business. If the non IT business bought a major chunk of income for Wipro then the price crash would have made sense to reflect the new reality but the non IT business contributed very little to the net profit of Wipro. The major money maker for Wipro was its IT business and that was not affected by the de-merger. So you have to ask yourself was the crash justified. We didn't think so.

If you had looked at the various valuation models which we calculate back then you would have seen the following numbers.

DCF valuation- 464 Rs.

2 Stage DCF - 250 Rs.

PE Ratio valuation- 511 Rs.

EPS Growth Valuation - 556 Rs.

Graham Number- 235 Rs.

Book Value- 108 Rs.


Median Fair Value- 487 Rs.
20% Margin of Safety- 390 Rs.

With the fair value at 487 Rs and 20% Margin of safety at 390 Rs, Wipro was a strong BUY when its market price was between 325 Rs. to 350 Rs. in June and July. You should have ignored all those so called stock market experts and bought the stock. The current price (as of 12-Aug-2013) is 447 Rs. that is gain of 35% ( assuming you bought the stock at 330 Rs.) in just two months with low risk while the overall market has crashed.

We have sold majority of our Wipro stock since there are other stocks which are looking attractive thanks to the recent crash.

What can you learn from this, ignore the so called stock market experts, focus on the fundamentals and you will make a lot of money.


Note - We do not offer investment advisory service.