136th Day Of Lockdown

Maharashtra49026232728117092 Tamil Nadu2850242275754690 Andhra Pradesh2069601204641842 Karnataka164924842322998 Delhi1427231282324082 Uttar Pradesh113378668341981 West Bengal89666630601954 Telangana7525753239601 Bihar7179446294400 Gujarat68855517922604 Assam5549737225132 Rajasthan4941835186763 Odisha4255028698292 Haryana4005433444467 Madhya Pradesh3729827621962 Kerala3170019147103 Jammu and Kashmir2392716218449 Punjab1901512491462 Jharkhand140705199129 Chhatisgarh10109761369 Uttarakhand8008484795 Goa7075511460 Tripura5520367528 Puducherry4147253758 Manipur301818147 Himachal Pradesh2879171013 Nagaland24056594 Arunachal Pradesh179011053 Chandigarh120671520 Meghalaya9173305 Sikkim7832971 Mizoram5022820
Business Companies 15 Aug 2019 Investors now prefer ...

Investors now prefer safety to price

DECCAN CHRONICLE. | RAVI RANJAN PRASAD
Published Aug 15, 2019, 2:20 am IST
Updated Aug 15, 2019, 2:20 am IST
The companies that have gained the most over the last three-month period are having a high Price/ Earning ratio of 50 to 100 and even more.
Investors generally think twice before buying a company stock with high P/E ratio.
 Investors generally think twice before buying a company stock with high P/E ratio.

Mumbai: As global and domestic risks buffet the equity market, investors are ready to give a high premium to safety, it seems. A study of BSE 500 companies shows that stocks with even steep P/E values are in good demand now.

The companies that have gained the most over the last three-month period are having a high Price/ Earning ratio of 50 to 100 and even more. Some companies in this category are: Avenue Supermart, the promoter of D-Mart stores (16 per cent gain in three months), Tata Group’s Trent (20.1 per cent), SBI Life Insurance (23.3 per cent), HDFC Life Insurance (28.7 per cent), Dabur (19.5 per cent), Asian Paints (16.2 per cent) and Naukri-promoter Info Edge (15.8 per cent).

 

The P/E ratio of these companies are currently upwards of 50 compared to the BSE 500 Index’s P/E of 25 and Sensex’s P/E of 26, indicating, theoretically, the number of years it will take for these companies to pay back the amount paid for each share purchased at current market price--assuming that these companies do not grow from the current level and their earnings stay constant.

P/E ratio is the relationship between a company’s stock price and earnings per share (EPS). It is a popular ratio that gives investors a better sense of the value of the company.

 

Naveen Kulkarni, Head of Research, Reliance Securities, said, “The general trend that we continue to witness is that B2C companies with low leverage and limited capex requirements have continued to outperform the broader market. They have managed to buck the trend of major slowdown and have beaten expectations. Investors are moving towards safety and therefore these stocks have continued to be the darling of the stock market.”

Investors generally think twice before buying a company stock with high P/E ratio. Most consumer goods (FMCG) companies currently have very high P/E ratio but investors are ready to pay a high premium for these stocks as these are considered safe and stable stocks that brave business cycles.

 

FMCG leader Hindustan Unilever’s P/E is 64 and its last three months return is 8.3 per cent.

Similarly, Dabur has a P/E of 50 and its three-month return is 19.5 per cent.

...




ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT