On November 7, 2017, the Lupin stock hit a 52-week low of Rs.846.20 when the pharma major informed the NSE and the BSE about the warning letter it had received from the USFDA.Following the steep decline in the stock price, company's market valuation eroded by Rs 78.66 billion. Concerned over Lupin Ltd.’s margins, most of the brokerage houses cut their target price on the stock. Investors were left wondering whether they should sell the stock, hold it, or buy more. The present case uses the backdrop of Lupin stock price fluctuations to teach the concept of risk and return analysis.
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The case is structured to achieve the following teaching objectives:
Learn the significance of risk and return analysis
Learn how to calculate historical and expected returns on a particular stock and the market.
Learn how to calculate historical and expected risk of a particular stock and the market.
Learn how to measure the systematic risk (β) of a particular stock.
Check whether the stock is underpriced or overpriced using the CAPM model.