P/E (Price to Earnings) ratio specifies a company’s current share price to its profits per share (EPS), which is a commonly used measure to define the value of a stock.
In comparison with the market average or competitors, a company with a lower P/E ratio is typically better. This means that investors are spending less money for every dollar of a company’s earnings.
This method helps investors to make informed decisions before investing in stocks.
Here are two undervalued blue chip companies
NTPC Ltd
NTPC Ltd is the country’s largest thermal power producing company, involved in power plant construction and electricity generation through its coal-based and gas-based power plants.The company’s business sectors include power generation, consulting services, power trading, ash utilization, and coal mining.
NTPC is a large-cap company with a market capitalization of Rs 2,03,629 crores. The company’s shares closed at Rs 210 per share on July 28, up 4 percent from the previous close price.
The company’s P/E ratio is 11.58, which is lower than the industry’s P/E ratio of 15.69, indicating that the stock is trading at lower price or is undervalued,With an EPS of 17.44.
NTPC’s profitability ratios have steadily increased, with return on equity at 11.50 percent, return on capital employed at 9.68 percent, and a dividend yield of 3.60 percent.
Further, the company’s net profit margin is 9.27 percent and its operating margin is 19.69 percent. In the previous six months, the stock has risen 24 percent, and in the last year, it has gained 37 percent.
Year on year, the company’s revenue has grown by 33 percent, from Rs 132,669 crore in FY 21-22 to Rs 1,76,206 crore in FY 22-23. Net Profit grew by 2.5 percent over the same period, climbing from Rs 15,940 crore to Rs 16,341 crore.
Bank Of Baroda
Bank of Baroda is the third largest PSU bank, offers a wide range of services including personal banking, corporate banking, international banking, and small and medium enterprise banking.
Bank is a large-cap company with a market valuation of Rs 1,03,996 crores. The company’s shares finished at Rs 201.10 a share on July 28, up 1 percent from the previous close price.
The company’s P/E ratio is 6.93, which is lower than the industry’s P/E ratio of 9.63, indicating that the stock is trading at lower price or is undervalued,With an EPS of 28.83.
Bank Of Baroda’s profitability ratios have steadily increased, with return on equity at 14.18 percent, return on capital employed at 2.08 percent, and a dividend yield of 2.78 percent.
Furthermore, the company’s operating margin has been marginally increased to 15.60 percent. The stock has risen 27 percent in the previous six months and 73 percent in the last year.
Bank of Baroda Interest earned climbed by 28 percent year on year, from Rs 73,385 crore in FY 21-22 to Rs 94,138 crore in FY 22-23. Net Profit grew by 90 percent within the same period, ranging from Rs 7,700 crore to Rs 14,688 crore.
Written by Omkar Chitnis
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