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 recognised 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.
Further, auto ancillary companies manufacture and supply parts, components, and accessories for the automotive industry. They provide critical components that are used in the production and maintenance of vehicles, such as engines, transmissions, brakes, suspensions, and electrical systems.
Following are a few auto ancillary stocks with PE less than the industry:
Amara Raja Energy & Mobility Limited
With a market cap of Rs. 22,621 crores, the stock surged by nearly 0.6 percent on BSE to Rs. 1,338.95 during the trading session of Tuesday.
The company experienced a significant increase in its revenue from operations, showing a year-on-year rise of around 10 percent to Rs. 3,251 crores in Q2 FY25, accompanied by around 1 percent decline in net profit to Rs. 236 crores, over the same period.
The stock has a P/E ratio of 23, compared to the industry’s P/E ratio of 29.2, indicating that the stock is trading at a lower price or in other words, the stock is undervalued.
The stock has delivered positive returns of nearly 76.4 percent in the last one year, as well as around 50 percent returns year-to-date.
Amara Raja Energy & Mobility Limited, formerly known as Amara Raja Batteries Limited, is one of the largest manufacturers of lead-acid storage batteries for industrial and automotive applications in India.
The company’s products are supplied to customer groups, including telecom, railways, power control, solar and ups under industrial battery business; and to automobile OEMs, replacement market and private label customers under automotive battery business.
Automotive Axles Limited
With a market cap of Rs. 2,652 crores, the stock surged by nearly 0.6 percent on BSE to Rs. 1,762 during the trading session of Tuesday.
The company experienced a decline in its revenue from operations, showing a year-on-year fall of around 15.2 percent to Rs. 495 crores in Q2 FY25, accompanied by around 20 percent decrease in net profit to Rs. 36 crores, over the same period.
The stock has a P/E ratio of 17.3, compared to the industry’s P/E ratio of 29.2, indicating that the stock is trading at a lower price or in other words, the stock is undervalued.
The stock has delivered negative returns of nearly 23.8 percent in the last one year, as well as around 19.2 percent returns year-to-date.
Automotive Axles Limited was established as a joint venture company in 1981, between Bharat Forge Limited, Pune, India and Meritor Heavy Vehicle Systems LLC, USA.
The company is primarily engaged in the business of manufacturing and sale of automotive components such as drive axles, non-drive axles, front steer axles, specialty & defence axles and drum & disc brakes.
Automotive Axles provides these products to the major domestic and global manufacturers of trucks & buses pertaining to segments such as light, medium & heavy commercial vehicles, military & off-highway vehicles, aftermarket and exports.
Banco Products (India) Limited
With a market cap of Rs. 7,894.2 crores, the stock surged by nearly 1.8 percent on BSE to Rs. 1,147.4 during the trading session of Tuesday.
The company experienced a significant increase in its revenue from operations, showing a quarter-on-quarter rise of around 11.3 percent to Rs. 895 crores in Q2 FY25, accompanied by around 101.4 percent growth in net profit to Rs. 139 crores, over the same period.
The stock has a P/E ratio of 23, compared to the industry’s P/E ratio of 29.2, indicating that the stock is trading at a lower price or in other words, the stock is undervalued.
The stock has delivered positive returns of nearly 92.8 percent in the last one year, as well as around 75.2 percent returns year-to-date.
Established in 1961, Banco Products (India) Limited is engaged in the business of manufacturing and supplying engine cooling modules and sealing systems for automotive and industrial applications, serving both domestic and international markets.
Wheels India Limited
With a market cap of Rs. 1,701.88 crores, the shares of a leader in the automotive wheels business surged by nearly 1.2 percent on BSE to Rs. 701.7 during the trading session of Tuesday.
The company experienced a decline in its revenue from operations, showing a year-on-year fall of around 8.4 percent to Rs. 1,176 crores in Q2 FY25, but around 700 percent growth in net profit to Rs. 24 crores, over the same period.
The stock has a P/E ratio of 18.1, compared to the industry’s P/E ratio of 29.2, indicating that the stock is trading at a lower price or in other words, the stock is undervalued.
The stock has delivered positive returns of nearly 3.5 percent in the last one year, as well as around 1.5 percent returns year-to-date.
Established in 1960, Wheels India Limited, a TSF Group company, is one of the world’s largest manufacturers of steel, aluminium, and wire wheels. It is engaged in the business of manufacturing road wheels, parts & accessories for machinery/equipments used by construction & mining industries, and Wind Turbine Parts.
Written by Shivani Singh
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
