P/E (Price to Earnings) ratio demonstrates the ratio of the current price of a company’s share in relation to its earnings per share (EPS), which is a common metric for evaluating the value of a stock.
In some instances, a company’s share price is considerably higher than its industry P/E, indicating that the stock is expensive. This advises investors to avoid making substantial investments in such priced enterprises since it implies excessive speculation.
If, on the other hand, a company’s P/E ratio is lower than the industry average, it suggests that its stock prices are undervalued in proportion to its earnings. This is viewed as a positive investing indication by value investors. This method can help investors avoid value traps.
Here are two alcohol stocks that are trading at a lower P/E ratio than the industry average.
Tilaknagar Industries Ltd
Tilaknagar Industries is a major producer of alcoholic drinks, including Indian-made Foreign Liquor, gin, vodka, and Scotch. Two of its most popular products, Madira Rum and Mansion House brandy are among the best-selling spirits in their respective categories.
The company belongs to the Small-cap category with a market capitalization of Rs 2,839 crores. Shares were trading at Rs 149 a share on July 7, down 1.72 percent from the previous close price.
The company’s price-to-earnings ratio is 18.56, which is lower than the industry P/E of 28.93, signifying that the stock is trading at a lower price, and it has an Earning per share of 8.29.
Revenue climbed by 48% year on year, rising from Rs 783 crore in FY 21-22 to Rs 1,164 crore in FY 22-23. Net profit has increased by 231%, from Rs 45 crore to Rs 149 crore and its debt-to-equity ratio is 0.52.
The profitability ratio for FY23, ROE is 31.04 percent and ROCE is 19.45 percent, with a net profit margin of 12.87 percent and operating margin of 9.64 percent.
G M Breweries Ltd
G M Breweries Ltd, set up in 1981 manufactures and markets Alcoholic Beverages such as Country Liquor and Indian-made Foreign Liquor. The company has a major presence in Mumbai, Navi Mumbai, and Thane and is the single largest manufacturer of country liquor in Maharashtra,
With a market valuation of Rs 1,065 crores, the firm falls into the Small-cap category. On July 7, shares were trading at Rs 583.20 a share, down 3.19 percent from the previous close price.
The price-to-earnings ratio of the firm is 11.13, which is lower than the industry P/E of 28.93, indicating that the stock is trading at a lower price, and has an Earning per share of 54.64.
Year on year, revenue increased by 29%, going from Rs 458 crore in FY 21-22 to Rs 593 crore in FY 22-23. From Rs 93 crore to Rs 99 crore, net profit grew by 6.4%. It is also a debt-free firm.
The profitability ratio for FY23 is 14.64 percent ROE and 19.23 percent ROCE, with a net profit margin of 16.82 percent and an operating margin of 22.18 percent.
Written by Omkar Chitnis
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