The EV/EBITDA ratio compares a company’s total value (including debt) to cash earnings (excluding financing costs, taxes, and non-cash expenses). It indicates how much investors are willing to pay for each rupee of operating profit generated by the company.
A higher EV/EBITDA ratio indicates that investors anticipate rapid growth and are willing to pay more for the company’s future earnings potential. A lower ratio may indicate that the company is undervalued or has limited growth opportunities.
Here are three Large-cap stocks with high EV/EBITDA ratios.
DLF Ltd.
DLF Limited’s share price hit its 52-week high of Rs 811.40 per share from its previous close of Rs 797.45 on Friday. They have a market capitalization of Rs 1,99,000 crores.
DLF Ltd has an EV/EBITDA ratio of 93, a low debt-to-equity ratio of 0.08, a dividend yield of 1.12, a current ratio of 2.31, and a net profit margin of 19 percent higher than the last three years.
Looking at their financials the net revenue rose by 3.5 percent year on year, from Rs 1,302 crore in Q2FY23 to Rs 1,348 crore in Q2FY24. In addition, the net profit increased by 30 percent year over year, from Rs 477 crore in Q2FY23 to Rs 622 crore in Q2FY24.
DLF Ltd’s share price has risen 62 percent in the last six months and 112 percent last year. For instance, if an investor invested Rs 1 lakh a year ago the current value would be Rs 2.12 Lakhs.
DLF Ltd is involved in real estate development through its subsidiaries, associates, and joint ventures, from land identification and acquisition to project planning, execution, construction, and marketing.
Bharat Heavy Electricals Ltd.
On Friday, the share price of the company rose 0.7 percent to its intraday high of Rs 199.15 per share from the previous close of Rs 197.75 per share. The BHEL has a market capitalization of 68,170 crores.
Bharat Heavy Electricals Ltd has an EV/EBITDA ratio of 83, with a low debt-to-equity ratio of 0.20 and a good current ratio of 1.2. However, the return on equity, return on capital employed and net profit margin remain low.
However, their net revenue decreased by 1.4 percent year on year, from Rs 5,203 crore in Q2FY23 to Rs 5,125 crore in Q2FY24. Furthermore, net profit fell 2083 percent year on year, from Rs 12 crore in Q2FY23 to a net loss of Rs 238 crore in Q2FY24.
The share price has risen 113 percent in the last six months and 143 percent in the last year. For example, if an investor made a Rs 1 lakh investment a year ago, the current value would be Rs 2.43 lakh.
Bharat Heavy Electricals Ltd is an integrated power plant equipment manufacturer that specializes in the design, engineering, manufacturing, erection, testing, commissioning, and servicing of a wide range of products and services for the economy’s core sectors, specifically power generation and distribution.
ICICI Prudential Life Insurance Company Ltd.
ICICI Prudential Life Insurance Company Ltd’s share price rose 0.3 percent to its intraday high of Rs 543.4 per share from its previous close of Rs 541.6 per share; they have a market capitalization of Rs 78,330 crores.
ICICI Prudential Life Insurance Company Ltd has an EV/EBITDA ratio of 72.86, a low debt-to-equity ratio of 0.11, a return on equity of 10 percent, and a return on capital employed of 8.4 percent.
According to their financials, net revenue decreased by 23 percent year on year, falling from Rs 22,605 crore in Q2FY23 to Rs 17,388 crore in Q2FY24. Furthermore, net profit increased by 22 percent year on year, from Rs 200 crore in Q2FY23 to Rs 244 crore in Q2FY24.
ICICI Prudential Life Insurance Company Ltd is a company that provides life insurance, pensions, and health insurance to individuals and groups. The company operates in participating, non-participating, and unit-linked lines of business.
Written by Sriram KV
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