On value hunt? 5 least expensive stocks to own when BSE m-cap is at all-time high
NEW DELHI: Calendar 2016 ended on a muted note, but to investors’ surprise, the benchmark equity indices rallied in the first few weeks of 2017 as if there is no tomorrow.
The S&P BSE Sensex is up over 6 per cent so far in the year and the total market valuation of BSE-listed companies has surged to an all-time high of over Rs 116.5 lakh crore as of Friday.
The S&P BSE Sensex is just 2 per cent away from its 52-week high of 29,077, and little over 1,600 points from its all-time high of 30,024 recorded was back in March 2015.
Clearly, there is a lot of buoyancy in the market and most of the stocks have rallied in double digits so far this year, making most investors feel left out.
However, there are still some stocks that are least expensive to own and can deliver value.
ETWealth has created a list of top five stocks that have the lowest forward PE values among the top 50 stocks.
It includes South Indian Bank, Karur Vysya Bank, IRB Infrastructure, Indiabulls Housing Finance and Oil India. The best option for investors hunting for value is to get hold of stocks that are available at lowest forward PE.
Why is forward PE & PEG important?
A regular P/E ratio is calculated by dividing the current stock price by its earnings per share, while a forward P/E ratio is calculated by dividing current stock price by its 'predicted' earnings per share.
"Historical performance is already known to the market. So the market always looks at future performance of a company. In these cases, forward multiples for P/BV, P/E are considered better parameters to value the company,” Vaibhav Agrawal, Head of Research and ARQ, Angel Broking, told ETMarkets.com.
Apart from forward PE, there are multiple valuation parameters that can be used based on their applicability in various sectors, suggest experts.
Agrawal said P/BV as a valuation parameter is better for the banking sector, while P/E is a better valuation parameter for consumption companies. “Debt companies or asset heavy models should be valued based on EV/Ebitda,” he said.
The PEG ratio or price/earnings to growth (PEG) ratio is important as it gives a comprehensive picture.
It is used to determine the stock value. A low P/E ratio may make a stock look good but a lower PEG ratio signifies that the stock may be undervalued given its earnings performance. The thumb rule is - the lower, the better.
The S&P BSE Sensex is up over 6 per cent so far in the year and the total market valuation of BSE-listed companies has surged to an all-time high of over Rs 116.5 lakh crore as of Friday.
The S&P BSE Sensex is just 2 per cent away from its 52-week high of 29,077, and little over 1,600 points from its all-time high of 30,024 recorded was back in March 2015.
Clearly, there is a lot of buoyancy in the market and most of the stocks have rallied in double digits so far this year, making most investors feel left out.
However, there are still some stocks that are least expensive to own and can deliver value.
ETWealth has created a list of top five stocks that have the lowest forward PE values among the top 50 stocks.
It includes South Indian Bank, Karur Vysya Bank, IRB Infrastructure, Indiabulls Housing Finance and Oil India. The best option for investors hunting for value is to get hold of stocks that are available at lowest forward PE.
Why is forward PE & PEG important?
A regular P/E ratio is calculated by dividing the current stock price by its earnings per share, while a forward P/E ratio is calculated by dividing current stock price by its 'predicted' earnings per share.
"Historical performance is already known to the market. So the market always looks at future performance of a company. In these cases, forward multiples for P/BV, P/E are considered better parameters to value the company,” Vaibhav Agrawal, Head of Research and ARQ, Angel Broking, told ETMarkets.com.
Apart from forward PE, there are multiple valuation parameters that can be used based on their applicability in various sectors, suggest experts.
Agrawal said P/BV as a valuation parameter is better for the banking sector, while P/E is a better valuation parameter for consumption companies. “Debt companies or asset heavy models should be valued based on EV/Ebitda,” he said.
The PEG ratio or price/earnings to growth (PEG) ratio is important as it gives a comprehensive picture.
It is used to determine the stock value. A low P/E ratio may make a stock look good but a lower PEG ratio signifies that the stock may be undervalued given its earnings performance. The thumb rule is - the lower, the better.
