D-Mart grossly overvalued, steer clear: Rajen Shah, Tradebulls
Dalal Street may be abuzz about the relentless rally in the shares of Avenue Supermarts, but Rajen Shah, Chief Investment Adviser, Tradebulls , says the stock is no longer a good investment bet at this price. Excerpts from an an interview with ETNow.
ET Now: Coming to D-Mart, what are your thoughts there?
Rajen Shah: I find it grossly overvalued. This year, D-Mart would post about Rs 500 crore profit and the stock is trading at a market cap of more than Rs 45,000 crore; that is 90 times the earnings. I think it is a great business, but certainly not a great investment at this price at all.
We had Infosys trading at 100 PE multiple in 2000 and the same Infosys you are getting today for 15 PE multiple. Obviously, there is a vast different between the growth seen then and today. Similarly, D-Mart is grossly overvalued today.
The stock is not correcting because 82 per cent is held by the promoter, the floating stock is very low and there is a lot of fancy for this company. But one day it will either come down or probably law of averages will catch up with it. We will have a time wise correction, maybe over the next two-three years, when the stock may not move at all. I do not know, but I think it is a grossly overvalued stock and investors need to actually exit it and remain careful about it.
ET Now: Coming to D-Mart, what are your thoughts there?
Rajen Shah: I find it grossly overvalued. This year, D-Mart would post about Rs 500 crore profit and the stock is trading at a market cap of more than Rs 45,000 crore; that is 90 times the earnings. I think it is a great business, but certainly not a great investment at this price at all.
We had Infosys trading at 100 PE multiple in 2000 and the same Infosys you are getting today for 15 PE multiple. Obviously, there is a vast different between the growth seen then and today. Similarly, D-Mart is grossly overvalued today.
The stock is not correcting because 82 per cent is held by the promoter, the floating stock is very low and there is a lot of fancy for this company. But one day it will either come down or probably law of averages will catch up with it. We will have a time wise correction, maybe over the next two-three years, when the stock may not move at all. I do not know, but I think it is a grossly overvalued stock and investors need to actually exit it and remain careful about it.
