The price/earnings-to-growth(PEG) ratio is a valuation metric that describes the relationship between the price of a stock, the earnings generated per share, and the growth rate.
PEG Ratio is calculated by dividing the PE ratio of a stock by its percentage EPS growth rate. As the P/E ratio does not account for future profits growth, the PEG ratio provides additional details on a stock’s price.
A PEG ratio of “1” indicates a perfect correlation between the company’s market value and its anticipated profits growth.Similarly, a PEG ratio greater than “1” indicates that the stock is overpriced.
If,company’s PEG ratio less than “1” is considered better, indicating that the stock is comparatively inexpensive.
Here are three Blue-chip companies with low PEG ratio
Coal India Ltd.
Coal India Ltd is a government-owned firm that mines and extracts coal. The company also manufactures non-coking and coking coal grades for thermal power generation companies, steel and cement factories, and other public and private industrial enterprises.
With a market capitalization of Rs 1,41,496 crores, the company belongs to the large-cap category. On July 20,company shares were trading Rs 229.55 a share, up 0.42 percent from the previous close price.
The company’s P/E ratio is 4.99, which is lower than the industry’s P/E ratio of 5.31, and the PEG ratio is 0.16, indicating that the stock is trading at lower price or is undervalued, with an EPS of 45.70.
In FY 22-23, the company’s sales increased by 26% year on year to 1,38,251 crore, while net profit jumped by 62% to Rs 28,133 crore and its debt to equity ratio at 0.07.
ICICI Bank Ltd.
ICICI Bank is a prominent private bank in India, offering corporate and retail clients a wide variety of financial services such as investment banking, life and non-life insurance, mortgages, and internet banking.
ICICI is India’s first bank to provide complete mobile banking, jewellery card solutions, and lifestyle benefits in addition to financial services for exclusive transactions.
With a market capitalization of Rs 6,82,579 crores, the bank falls into the large-cap category. On July 20,company shares were trading at Rs 976.45 a share, up 0.31 percent from the previous close price.
The company’s price-to-earnings(P/E) ratio is 20.39 and the company’s PEG ratio is 0.58 indicating that the stock is trading at a lower price or undervalued and it has an EPS of 47.85.
Interest earned by the bank grew by 27% year on year to Rs 1,21,066 crore in FY 22-23 from the previous year, while net profit increased by 33% to Rs 34,463 crore and its net interest margin is 3.6%.
Axis Bank Ltd.
Axis Bank provides lending, liability products, card services, depository, financial advising, and NRI services to individuals and small enterprises.
The bank is the second-largest participant in the Indian market,with an 18% market share in UPI transactions and 17% in UPI P2M.
The bank belongs to the large-cap category with a market capitalization of Rs 2,95,622 crores. Shares were trading at Rs 959.25 on July 20, down 0.52 percent from the previous close price.
The company’s price-to-earnings ratio is 27.58 and company’s PEG ratio is 0.15 indicating that the stock is trading at a lower price or undervalued and it has an EPS of 34.93.
Interest earned by the bank grew by 27% year on year to 87,448 crore in FY 22-23 from the previous year, while net profit jumped by 65% to Rs 23,342 crore and its net interest margin is 3.27%.
Written by Omkar Chitnis
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