Is Yes Bank a Good Stock for Long-Term Investment? 10-15 Years Horizon

The stock market can be a tumultuous terrain for investors looking to secure their financial future. Among the many names, one of the most talked-about is Yes Bank. Many are interested in its potential as a long-term investment over the next 10-15 years, but the consensus seems to be a cautious 'no.'

Why Yes Bank Stands Out

Most investors prefer investing in Yes Bank for several reasons. Firstly, the bank has managed to attract attention through its operational changes and potential turnaround strategy. However, the decision to invest in Yes Bank should be approached with caution. Divesh Pal, a seasoned investor, advises against purchasing Yes Bank shares for long-term investment (LTI) due to its overvaluation compared to its peers.

According to Divesh Pal, "If you want to gamble, only then go for Yes Bank. But gambling time is also over. For gambling, the right time to enter was at 15Rs in June 23. See if Yes Bank touches 34Rs, it won't be justifying its market capitalization of 85K CR at this juncture."

Evaluating Alternatives

The decision to invest in Yes Bank or other banks should not be made impulsively. Investors should carefully evaluate equivalent-priced stocks with stronger fundamentals. For instance, HDFC, SBI (State Bank of India), and HDFC Bank are popular choices due to their consistent performance and strong fundamentals.

Divesh Pal further suggests, "Choosing this stock for LTI, one should do some brousing about other 'equivalently priced' stocks. In this category, there are two types of stocks that are a little higher priced but have stronger fundamentals languishing in unknown areas under certain postulates. For example, IRFC traded in a range of 25 to 35 from January 2023 to July 23, even after having excellent fundamentals."

Financial Performance Metrics

Another crucial aspect to consider when evaluating Yes Bank is its financial performance. Below are some key metrics as of the latest consolidated results:

The company's story is far from encouraging. Despite having some quarters of growth, the overall performance shows a significant decline. Net Non-Performing Assets (NPA) at 0.83% is a concerning figure that reflects the bank's operational challenges. The market capitalization and P/E ratio suggest that the stock is overvalued, and the company is struggling to meet investor expectations.

Market Sentiment and Future Prospects

While the immediate future is unpredictable, some positive developments may indicate that the worst may be over. For instance, HDFC has recently purchased a decent stake in Yes Bank, which could stabilize the situation. However, investors should conduct their own due diligence to understand the true implications of such investments.

Divesh Pal concludes with a prudent advice: "Markets can't be predicted. However, it seems the worst is over for Yes Bank. If it helps, HDFC has bought a decent stake in Yes Bank. Do your own math."

Given the current operating environment, a more focused approach on diversified portfolios would be advisable. Investing in Yes Bank for a long-term horizon of 10-15 years is not recommended due to the prevailing risk and uncertainties. Instead, focusing on high-quality banks such as HDFC, SBI, and others, may offer better prospects.

For investors looking to secure their financial future, a balanced portfolio and thorough analysis are key. Happy investing!