Whenever we try to analyzed a company, we use various financial ratios. In between them, PE ratio is one of the most important ratios to judge a company. Most of the time investors used this ratio to find undervalued stocks.
Company Selection process
Whenever a company’s PE ratio is lesser than that particular market ratio or the competitors, It is thought that the company is undervalued.
Today we are going to discuss some of the large cap companies which have lesser PE ratios than their competitors. You should check other matrices and ratios before investing in these companies. 3 large cap companies
- Fundamental Analysis
This company is one of the leading chemical companies of our country. The PE ratio of this company is 28.64 whereas the industry PE ratio is 30.44. Their low Debt to Equity ratio of 0.14 percent also shows that this company is fundamentally strong.
This company is giving 39.62 percent Return on Equity with a net profit margin 17.80 %. This company is growing at an amazing 26 % CAGR every year.
- Technical Analysis:
We are using two indicators to get to know if a company is undervalued or not. These are the 200 day Moving Average and Relative Strength Index (RSI).
The current price of the share is 2264 whereas 200 DMA is 2260. As the share price is slightly more than 200 DMA , it can be an indicator for upward trends.
If we talk about Daily RSI, we can see that this company is having 53.29 RSI. We know that if a company’s RSI is higher than 60, that can be an indicator of upward movement.
- Final Words:
Though it is lower than 60, other indicators are showing that this company has a great chance for upward movement of price.
- Fundamental Analysis
This company is very popular among the leading pharmaceutical and nutraceutical industries. They are involved in manufactures and sales of medicines. The PE ratio of this company is 23.38 whereas the industry PE ratio is 28.47. They have a low debt to equity ratio of 0.21 which shows that the company is fundamentally strong.
If we talk about profitability, the Return on Equity is 22.98 % and net profit margin is 17.91 %. This company has 12.57% of 5 year compounded annual sales growth. In the last one year this company has given a 22.77% return to its investors.
- Technical Analysis
Now let’s try to understand the technical sides of the stock by using 200 DMA and RSI.
The current price of the share is 3475 whereas 200 DMA is 3567. So it can be an indication of a bearish trend. The RSI of this company is 48.88 % which is quite lower than the industry standard. It is also an indication of a shorter bearish trend.
- Final Words
Though the technical analysis is showing a bearish trend, the strong fundamentals are indicating that this company is still undervalued.
So you should take your final call after proper research of the company.
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