PE ratio or Price to earning ratio is considered as simplest way to gauge the valuation of a Company. In this article I will discuss 5 stocks which have PE ratio less than 1. Note there are many more stocks but those have market capitalization less than 100 crores. I have not included them in the list as they are lesser known and more risky compared to stocks with market capitalization more than 100 crores.
So lets discuss these under valued companies one by one. The stocks are presented in alphabetic order only. The aim of article is to present list of unknown under valued companies based on PE ratio. This is starting point and can be used to explore these companies in details.
Available Finance limited
It is part of the Agarwal group which is head quartered in Indore Madhya Pradesh. It is registered as NBFC and is in business of loans. The main loan verticals are vehicle loans (both new vehicle and old vehicle). Below are the details of the company for your reference
- Market Capitalization – 167
- PE – .81
- Book value – 839
Chennai Petroleum corporation limited
It is Government of India enterprise. It is public sector refinery company. It is group company of Indian Oil. It has mainly two refinery Cauvery basin refinery and Manali refinery. It has joint venture Indian Additives limited. Through this joint venture it is in the business of manufacturing and marketing of lubricating oil additives.
- Market Capitalization – 3,120
- PE – .87
- Book value – 346
It is currently trading below book value and has generated profit this year. It also pays decent dividend of 1% at current market price.
Forbes and Company limited
It can be viewed as Conglomerate as it has multiple business verticals like Engineering, Real estate and transaction processing. All three business verticals are unrelated as well. As part of engineering it manufactures precision products in different categories. In real estate vertical the company is present in construction of residential projects the major one being Vicinia in Powai.
As part of the transaction processing business it offers services like Banking Kiosks, Self service Kiosks, bill payment machines and automated ticket vending machines. This seems to be new age business verticals of the company.
- Market Capitalization – 910
- PE – .19
- Book value – 168
It is now Shapoorjee and Pallonji company with them holding around 72%.
SREI Infrastructure and Finance limited
It is a non banking financial company. Primary action of them company is Infrastructure advisory. It is loss making company and you can see that the book value is negative for it as well. These are not good symptoms for the company.
- Market Capitalization – 147
- PE – .94
- Book value – -272
Suumaya Industries limited
It is in business of Indo western designer kurtis. It sells the products under the brand name same as the company name. It along with Chennai petroleum is the only two companies in this list which pays dividend. The dividend yield at current market price is more than 1%.
- Market Capitalization – 219
- PE – .46
- Book value – 248
The company is trading below the book value as of now. It is trading around 16% of the book value making it very undervalued stock. So based on the book value and price to earning ratio you can see that it is under valued. It is profit making company as well.
Conclusion
Price earning ratio should not be only criteria to make investment decision. As there may be multiple reasons why the stock is trading cheap like Promoters have pledged stocks, loss making company, bad news on company like corporate issues and other similar cases.
It may also be that none of those issues exists but future growth potential of the company is blur as of current scenario. But if none of the issues exist then these under valued companies may give good returns as well.