P/E Ratio or Price to Earnings Ratio is a widely used metric to define the value of a stock, this P/E depicts the ratio of the current price of a company’s share in relation to its earnings per share (EPS).
In particular situations, a company’s share price is relatively greater than its earnings, indicating that the company’s share price is overpriced. This indicates investors to avoid large investments in such expensive companies since it suggests excessive speculation.
On the other hand, if a firm has a lower-than-average P/E, it implies that the stock prices are undervalued in proportion to the company’s earnings. This scenario is seen positively by value investors as an investing indication. This method assists investors to avoid falling into a value trap.
Here are two multibagger 52 week high stocks with low P/E ratios
Suzlon Energy Ltd
Suzlon Energy Ltd., one of India’s top end-to-end wind power solution providers, manufactures wind turbine generators, power generating, and related parts.
The company belongs to the Mid-cap category with a market capitalization of Rs 20,616 crores. Shares were trading at Rs 16.80 a share on July 3, up 9.80 percent from the previous close price.
In the past year, the company’s share price increased from Rs 6.11 to current levels, giving multibagger returns of 175%. Therefore, if an investor purchased 1 lakh company shares in the previous year, their holdings would now be worth 2.75 lakhs!
The company’s price-to-earnings ratio is 5.79, which is lower than the industry P/E of 27.90, signifying that the stock is trading at a lower price, and it has an EPS of 2.64.
Revenue declined by 9.2% year on year, from Rs 6,581 crore in FY 21-22 to Rs 5,970 crore in FY 22-23. Net profit has increased by 1,839%, from a loss of Rs 166 crore to a profit of Rs 2,887 crore, and its debt-to-equity ratio is 1.73.
Power Finance Corporation Ltd
Power Finance Corporation (PFC) is a financial institution specialising in power sector financing, the Company offers financial products and services for a variety of power projects in the generating, transmission, and distribution sectors.
With a market capitalization of Rs 58,015 crores, the firm belongs to the Large-cap category. On July 3, shares were trading at Rs 219.75 a share, up 1.78 percent from the previous close price.
In the past year, the company’s share price increased from Rs 107.55 to current levels, giving multibagger returns of 105%. Therefore, if an investor purchased 1 lakh company shares in the previous year, their holdings would now be worth 2.05 lakhs!
The company has an EPS of 60.18 and a price-to-earnings ratio of 3.59, which is lower than the industry P/E of 11.56 and indicates that the stock is trading at a lower price and its debt-to-equity ratio is 2.83.
From Rs 76,261 crore in FY 21–22 to Rs 77,568 crore in FY 22–23, revenue increased by 2% yearly. The net profit has grown by 13%, from Rs. 18,790 crore to Rs. 21,178 crore.
Written by Omkar Chitnis
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