The P/E (Price to Earnings) ratio compares a company’s current share price to its earnings per share (EPS), which is a generally used measure to determine a stock’s value.
The dividend yield is a financial measure that compares cash dividends paid to shareholders to the market price per share. It is calculated by dividing the dividend per share by the share price and multiplying the result by 100.
A dividend-paying stock offers investors two ways to earn: capital appreciation of the stock price and distribution of cash earned by the firm (dividend).
Here are two Undervalued High Dividend Yield stocks
Ambika Cotton Mills Ltd
Ambika Cotton Mills Ltd is a small-cap stock with a market capitalization of Rs 924 crores. The company’s shares were trading at Rs 1,615.05 per share, down 1.63 percent on Thursday from the previous close price.
The company’s P/E ratio is 9.12, which is lower than the industry’s P/E ratio of 35.45, indicating that the stock is trading at a lower price or is undervalued, With an EPS of 163.81.
The company’s dividend yield is around 2.23 percent. In the last financial year, the company’s board of directors recommended a final dividend of Rs 35 per equity share i.e., a 350 percent payout on the face value of Rs 10.
In the recent financial year, Ambika Cotton Mills attained profitability ratios of 13.70 percent return on equity and 18.83 percent return on capital employed. Consequently, the company has a net profit margin of 13.20 percent and an operating margin of 18.74 percent.
The company’s revenue has declined by 12 percent year on year, from Rs 253 crore in Q1FY23 to Rs 221 crore in Q1FY24. During the same period, net profit declined by 47 percent from Rs 38 crore to Rs 20 crore.
Ambika Cotton Mills is a company that manufactures and sells specialty cotton yarn to producers of premium branded shirts and t-shirts. The company also operates in the textile and windmill industries.
Gujarat State Fertilisers & Chemicals Ltd
Gujarat State Fertilisers & Chemicals Ltd is a small-cap stock with a market capitalization of Rs 6,965 crores. The company’s shares were trading at Rs 174.80 per share, up 0.26 percent on Thursday from the previous close price.
The company’s P/E ratio is 6.60, which is lower than the industry’s P/E ratio of 15.56, indicating that the stock is trading at a lower price or is undervalued, With an EPS of 25.91.
The company’s dividend yield is around 5.79 percent. During FY 22-23, the company’s board of directors recommended a dividend of Rs 10 per equity share i.e., a 500 percent payout on the face value of Rs 2.
The company’s profitability ratios have increased over the years with a return on equity at 10.51 percent and a return on capital employed at 12.11 percent. In addition, the company has a net profit margin of 11.13 percent and an operating margin of 13.67 percent.
The company’s revenue has declined by 31 percent year on year, from Rs 3,018 crore in Q1FY23 to Rs 2,062 crore in Q1FY24. During the same period, net profit declined by 67 percent from Rs 345 crore to Rs 112 crore.
Gujarat State Fertilisers & Chemicals Ltd is engaged in the manufacturing of various fertilizers and industrial products like plastics & synthetic rubbers and man-made fibers.
Written By Omkar Chitnis
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