The ‘price/earnings to growth’ ratio, popularly known as the PEG ratio, is a ratio of the price-to-earnings (P/E) ratio of a stock and the growth rate of its earnings for any given time period.
Generally preferred to be less than ‘1’, the PEG ratio is used to determine a stock’s value while also factoring in the company’s expected earnings growth providing a comparatively more complete picture than the famously tracked metric of P/E ratio.
Listed below are three stocks under the Tata Group universe that have a PEG ratio of less than 1:
Indian Hotels Company Limited
With a market capitalization of Rs 58,520 crores, the stocks of Indian Hotels Company Limited, operating & managing a group of Hotels, closed at Rs 412 on Friday, gaining around 1.70 percent as compared to the previous closing levels of Rs 405.15 apiece. The company has a PEG ratio of 0.96.
During the recent financial years, the company’s financials show positive movements as far as the net sales is concerned showing an increase from Rs 3,056.22 crores during FY21-22 to Rs 5,809.91 crores during FY22-23. The after-tax profits, during the same period, transitioned from an after-tax loss of Rs 222.4 crores to an after-tax profit of Rs 971.43 crores.
Having a glance at the profitability metrics of the company, the return on equity (RoE) was reported at 12.91 percent during FY22-23 and the return on capital employed (RoCE) was reported at 17.15 percent. During the FY22-23, the net profit margin was reported at a healthy number of 16.72 percent.
Tata Power Company Limited
With a market capitalization of Rs 83,845.71 crores, the stocks of Tata Power Company Limited, engaged in the business of power generation within and outside India, closed at Rs 262.40 on Friday, gaining around 1.70 percent as compared to the previous closing levels of Rs 258.15 apiece. The company has a PEG ratio of 0.56.
During the recent quarters, the company’s financials show positive movements as far as the net sales and after-tax profits are concerned with the former increasing from Rs 12,453.76 crores during Q4FY22-23 to Rs 15,213.29 crores during Q1FY23-24, and, the after-tax profits, keeping the timeframe the same, moving up from Rs 759.7 crores to Rs 790.3 crores.
Having a look at the profitability metrics of the company, the return on equity (RoE) improved from 12.13 percent during FY21-22 to 14.87 percent during FY22-23, and, the return on capital employed (RoCE) increased from 10.13 percent to 13.3 percent.
TRF Limited
With a market capitalization of Rs 262.80 crores, the stocks of TRF Limited, an engineering company undertaking turnkey projects of material handling in India, closed at Rs 238.80 on Friday, gaining around 1.50 percent as compared to the previous closing levels of Rs 235.25 apiece. The company has a PEG ratio of 0.16.
During the recent financial years, the company’s financials show positive movements as far as the net sales is concerned showing an increase from Rs 127.14 crores during FY21-22 to Rs 177.1 crores during FY22-23. The after-tax profits, during the same period, transitioned from an after-tax loss of Rs 16.09 crores to an after-tax profit of Rs 87.52 crores.
Having a glance at the profitability metrics of the company, the return on capital employed (RoCE) was reported at a huge 128.7 percent. During FY22-23, the net profit margin was reported at a healthy number of 49.42 percent.
Written by Amit Madnani
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