Monday, 12 February 2018

Best Stock Buys/Best Stock Advisory Investing Tips By TradeIndia Research - 12-02-0-2018

Value buys? Top 20 stocks which are trading 50% discount to their 5-year average PE



TradeIndia Research

As many as 20-30 bluechip names are trading almost 50 percent discount to their 5 year average of price to earnings multiple and can be considered attractive for investment purpose.

The euphoria on the D-Street witnessed in the whole of the year 2017 witnessed a slowdown in the first two months of the year 2018 which led to a huge correction in both large as well as mid & smallcap names.
As many as 20-30 bluechip names are trading almost 50 percent discount to their 5 year average of price to earnings multiple and can be considered attractive for investment purpose. Stocks which are trading below their 5-year average include names like BEMLEicher MotorsBoschSBIHero MotoCorpHPCLTCSIOCRECInfosysBajaj Auto and Maruti Suzuki India Ltd.
Let us first understand what is PE ratio? The price to earnings ratio which is also known as PE multiple is calculated by dividing the market value of share by Earnings per Share (Market Price/EPS).
It indicates the amount an investor is willing to pay for each rupee worth of earnings of the company. Price-earnings (P/E) ratio is one of the most widely used value indicators and quite prominently used by investors while investing.
TradeIndia Research

Low PE multiple compared to average is a good sign because it also suggests that earnings have also started to bounce back and the stock is not entirely momentum driven.
“Stocks with low PE ratio are perceived as having a cheaper current price, hence expected to generate a higher return in the subsequent period. There are plenty of stocks which are available at a deep discount price which is part of value investing with low PE and combining it with other factors such as Management, Industry and Profitability i.e margins,” Ritesh Ashar – Chief Strategy Officer at KIFS Trade Capital told Moneycontrol.
“Among the stocks, DHFL is trading at a discount of 79% with respect to 5 years Avg PE looks to be a very good bet for the long term and value investors who are looking for a balanced portfolio with low risk,” he said.
Ashar further added that other such names which should be accumulated at these levels having low PE with respect to 5 Years Avg PE are SBI, Chennai Petro, BEML, SunteckNCC, and TCS.
Most of the top tier bluechip names are trading well below their 5-year average PE. But, investors should focus on stocks in those sectors which are likely to outperform.
“A sector which has done well in last two-three years and its heavyweight available at discount will be an opportunity for investors. Stocks like SBI, TCS, Eicher, and NCC does offer opportunities for investors to buy them at lower levels,” Mustafa Nadeem, CEO, Epic Research told Moneycontrol.
PE multiple signify the past performance if the company; however, for taking investment decisions investors should also look at the future earnings potential of the company. This can be done by calculating forward PE.
For calculating forward PE, analysts’ use earnings estimates to determine what the relative value of the company will be at a future level of earnings. If the forward P/E ratio is lower than the current P/E ratio, it means analysts are expecting earnings to increase.
On the other hand, if the forward P/E is higher than the current P/E ratio, analysts expect a decrease in earnings.
TradeIndia Research


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2 comments:

  1. Rudra Investment Market Research – SEBI Registered Investment advisory Company In India. Our experts provides trading recommendations in Stock, Commodity and Currency Market.

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