One of the effective methods for assessing whether a stock is undervalued or overvalued is by analysing key metrics such as the Price-to-Earnings (P/E) ratio and the industry P/E average.
The P/E ratio or Price-to-Earnings ratio compares the current share price to the earnings per share (EPS) of a company, serving as a widely recognized indicator for determining the value of a stock.
When a company’s P/E ratio is significantly higher than the industry average, it may indicate that the stock is overvalued, as investors are paying a premium for its earnings.
Conversely, a substantially lower P/E ratio relative to the industry average could indicate that the stock is undervalued, potentially signalling a buying opportunity.
Following are a few waste management stocks that are currently trading at a lower P/E ratio than the industry average:
Antony Waste Handling Cell Limited
With a market cap of Rs. 2,108.8 crores, the shares of a leading player in the Indian Municipal Solid Waste Management industry surged by 2.1 percent on BSE to Rs. 756 on Friday.
The company’s revenue from operations stood at Rs. 227 crores in Q1FY25, rising by 2.3 percent YoY from Rs. 222 crores in Q1FY24, but the after-tax profit declined by 8.7 percent to Rs. 21 crores from Rs. 23 crores, during the same period.
The stock has a P/E ratio of 24.8, compared to the industry’s P/E ratio of 33.1, indicating that the stock is trading at a lower price or in other words, the stock is undervalued.
The company witnessed a net profit margin of 11.44 percent in FY24 increasing from 9.88 percent in FY23 and an operating margin of 17.02 percent rising from 15.06 percent, over the same period.
The stock has delivered multibagger returns of nearly 117 percent in the last one year, and around 50 percent of positive returns year-to-date.
Antony Waste Handling Cell Limited is engaged in the business of mechanical power sweeping of roads and collection and transportation of waste.
EMS Limited
With a market cap of Rs. 4,627.6 crores, the shares of a company engaged in offering water and sewerage infrastructure solutions surged by 1.12 percent on BSE to Rs. 847.95 on Friday.
The company’s revenue from operations stood at Rs. 206 crores in Q1FY25, rising by 49.3 percent YoY from Rs. 138 crores in Q1FY24, and the after-tax profit grew by 60.8 percent to Rs. 37 crores from Rs. 23 crores, during the same period.
The stock has a P/E ratio of 27.8, compared to the industry’s P/E ratio of 43.5, indicating that the stock is trading at a lower price or in other words, the stock is undervalued.
The company witnessed a net profit margin of 19.24 percent in FY24 decreasing from 20.22 percent in FY23 and an operating margin of 26.85 percent falling from 28.19 percent, over the same period.
The stock has delivered multibagger returns of nearly 198 percent in the last one year, and around 86.8 percent of positive returns year-to-date.
Incorporated in 2010, EMS Ltd provides a range of services, including EPC and O&M in sewerage solutions, water supply systems, and wastewater schemes for government authorities and local municipal bodies.
The company also engages in electricity transmission and distribution and the manufacture of items used for construction purposes.
VA Tech Wabag Limited
With a market cap of Rs. 8,366.5 crores, the shares of a global leader in the water industry surged by 2.8 percent on BSE to Rs. 1,376 on Friday.
The company’s revenue from operations stood at Rs. 626 crores in Q1FY25, rising by 13.2 percent YoY from Rs. 553 crores in Q1FY24, and the after-tax profit grew by 10 percent to Rs. 55 crores from Rs. 50 crores, during the same period.
The stock has a P/E ratio of 33.7, compared to the industry’s P/E ratio of 38.8, indicating that the stock is trading at a lower price or in other words, the stock is undervalued.
The company witnessed a net profit margin of 9.09 percent in FY24 increasing from 0.05 percent in FY23 and an operating margin of 14.37 percent rising from 12.24 percent, over the same period.
The stock has delivered multibagger returns of nearly 177.6 percent in the last one year, as well as around 111.3 percent returns year-to-date.
VA Tech Wabag Limited is engaged in the design, supply, installation, construction, O&M of drinking water, wastewater treatment, industrial water treatment and desalination plants including the production of energy from biogas and sludge management.
Written by Shivani Singh
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