The benchmark Sensex is trading at a price-to-earning multiple of about 23 times one-year trailing earnings, the levels usually unheard of in emerging markets. Here are 10 stocks with P/E multiples of over 1,000x which have risen up to four times in one-year.
The recent rally in Indian equity markets has filled most investors with joy, but has also prompted some to raise concerns about high valuations. Benchmark indices Sensex and Nifty have risen by about 14%-15% in the last one year, and by a stellar 21%-22% since January this year. NSE Nifty 50 recently hit the long-awaited 10,000-mark in July for the first time ever, with the Sensex too posting all-time highs simultaneously.
Such sharp gains have led some investors to question the sustainability of the high valuations. The benchmark Sensex is trading at a price-to-earning multiple of about 23 times one-year trailing earnings while broader Nifty has it at 25, the levels usually unheard of in emerging markets.
However, the benchmark index is not alone commanding such high valuations at the moment. Earlier this month, FE Online reported about four Nifty companies with P/E multiples of over 50x. Today, we take a look at a few stocks which have gone farther ahead, with P/E multiples of over 1,000x based on one year’s trailing earnings. Not only this, 10 of these stocks have returned more handsome gains than the benchmark in the last one year, with some stocks rising by as much as four times.
SVP Global Ventures’ stock has a P/E ratio of 3,982.92x, and has nearly grown four times, rising 393.31%, in the last 12 months to Rs 483.2 at Wednesday’s close. The price of the yarn manufacturing firm’s shares was at Rs 97.95 in August 2016.
Adani Transmission shares have a P/E ratio of 3,077.5 and the shares of Adani group firm have more than tripled in the last one year, returning 222.52% to rise to Rs 122.4 from Rs 37.95. Earlier this week itself, the shares of Adani Transmission advanced 5.8% in the intraday trade on Monday after it acquired 100% equity capital in two SPV companies on 4 August 2017.
Other shares which are having P/E ratios more than 1000 and have more than doubled in the last one year include Pritika Auto Industries, which is up 150% at Rs 62.5 with a P/E ratio of 6,265x; Millitoons Entertainment, which has grown 153.42% to Rs 44.45 with a P/E ratio of 2,155x; and Swan Energy (up 94.79% at Rs 121.55) having a P/E multiple of 1,736.43x.
Among other super expensive outperformers are Bajaj Finserv (up 90.2% at Rs 5,113.7) with a P/E multiple of 1,420.47x; Gokul Refoils and Solvent (up 77.46% at Rs 25.2) with a P/E ratio of 1,260x; Modi Naturals (up 60.69% at Rs 143.5) with a P/E multiple of 7,175x; PDS Multinational Fashions (up 40.05% at Rs 175.65) with a P/E ratio of 1,294.74x; and UPL (up 33.76% at Rs 829.6) with a P/E ratio of 2,370.29x.
There are some other stocks too which have P/E ratios of more than 1,000x, but have returned less than the benchmark indices. These are Infibeam Incorp, Trigyn Tech, TD Power Systems, Westlife Development, Viaan Industries, Fortune Financial Services, Monotype India, Looks Health, NIIT, Linde India, Birdhi Chand Pannalal Agencies, Crescent Leasing, Tarmat, Starcom Information Technology and Equitas Holdings.
P/E ratio explained: The price-earnings ratio (P/E ratio) is a financial ratio which is used for valuing a company’s shares. This ratio is widely used by market participants as a filter along with various other factors for picking and selecting the stocks. The P/E multiple is a ratio of the current market price of a particular stock to its earnings per share (EPS). P/E ratio is also sometimes known as the price multiple or the earnings multiple.