Every screener beginner finds Coal India within the first week: single-digit PE, huge dividend yield, monopoly position. If it's so cheap, who is wrong — you or the market?
Why the market pays less for some earnings
A PE ratio is a price on future earnings. The market pays 70x for Havells and 7x for Coal India because it believes one earnings stream grows for decades and the other eventually shrinks. Sometimes the market is right. Sometimes — and this is where returns hide — it overprices the pessimism.
The questions that matter
How long does coal demand in India actually keep growing (hint: longer than most global commentary assumes)? What fraction of profit reaches shareholders as dividends, and is that sustainable from free cash flow rather than reserves? What would break the thesis — pricing regulation, evacuation constraints, or an accelerated renewables build-out?
The transferable lesson: 'cheap' is a starting question, never an answer. A low multiple is the market telling you its fears. Your job is to check whether the fears are priced correctly.