Hello, Warren Buffett said, “Be fearful when others are greedy and be greedy when others are fearful.”
There are a lot of stocks in the current volatile market which is trading at a discount from their 52-week high and are available at attractive valuations.
To check a company's valuation, investors often look at the P/E ratio, which is the price-to-earnings ratio.
The P/E ratio tells us how much a company's stock is getting priced in the market against its earnings per share or EPS.
In simple language, how much money is the market ready to invest in the company's stock to earn Re.1 of the company, we can find this from the P/E ratio.
The formula for the P/E ratio is: P/E = Current Market Value (CMP) / Earnings Per Share (EPS)
The P/E ratio of a company is always seen in a relative way.
If that company's sector's P/E ratio is higher than the company's PE ratio, then that company can be said to be relatively cheaper than the overall industry.
Investors should remember that if a company's P/E ratio is less than its industry P/E or the P/E of close competitors, it may be undervalued.
But not necessarily. Investors should do thorough research to find out the reason for the pitch of the P/E being worked out.
Today we bring you an analysis of some such growth stocks, i.e. those stocks that are growing very fast, and whose P/E is less than their industry P/E.
The stocks that we have considered in the list have:
The numbers in the video that we have considered are for the market closing on 6th July 2022.
We will cover this list in ascending order of 5 years sales growth CAGR.
That is, the stock which has the highest 5-year sales growth, we will cover it in the last.
So let's start today's list.
The first company is Angel One Limited.
Angel One was established in 1997 and the company was earlier known as Angel Broking.
The company is involved in the business of Stock, Commodity, Currency Broking, Institutional Broking, Distribution of Mutual Funds, etc.
It is also a member of BSE, NSE, Metropolitan Stock Exchange of India Ltd, Multi Commodity Exchange of India Ltd, and National Commodity and Derivatives Exchange Ltd.
Angel One’s 5-year sales growth CAGR is 39.10%.
As you can see, the company has been successful in onboarding new clients consistently for years.
The company has doubled its active users in the financial year 2021-22.
As of 31 March 2022, the company has 37 lakh, active users, on NSE as against 15.7 lakh in the previous year.
With this, the company has also expanded the market share of its active client base on NSE.
The market share of Angel One was 8.3% in the last financial year, which has increased to 10.1% this year.
Another strength of the company is its strong technology adoption and user interface.
The company now acquires customers 100% digitally. Also, 75% of their customers order through the mobile app.
The challenge for the company is the intense competition in this sector.
Apart from big banks, NBFCs, and startups, almost every financial services company is competing in the brokerage space.
Also, because of the entry barrier function in this market, it can be difficult to maintain or grow market share in the long term.
As you can see on your screen, we have shown some key financial and technical ratios of the company.
We have also included the prices of 2 technical indicators so that you can see the stocks from a technical perspective as well
They are 200 days simple moving average i.e. 200 days SMA and RSI (14).
If a company's stock price is trading above the 200 DMA, the stock can be considered bullish.
And if the price is trading below the 200 DMA then the stock can be said to be bearish.
In terms of RSI, RSI values ​​below 30 are generally considered oversold, and thus a trend reversal is possible i.e, a downtrend can lead to an uptrend.
Similarly, an RSI value above 70 is considered overbought, and a trend reversal is likely.
Another company is Cholamandalam Financial Holdings Limited i.e., CFHL.
Cholamandalam Financial Holdings is a part of the Murugappa Group, considered one of the most diversified business conglomerates in India.
The company is registered with RBI in the form of a Core Investment Company.
Reserve Bank's experience A CIC company has to invest at least 90% of its net assets in group companies, of which at least 60% is through equity.
CHFL is a pure investment company with a primary investment in Cholamandalam Investment and Finance Company Limited (CIFCL).
Its revenue mainly comes from CIFCL's dividend and the company is also mainly dependent on this source for repayment of its debt.
Cholamandalam Financial Holdings has a 5-year sales growth CAGR of 40.36%.
As we mentioned earlier, the main revenue of the company comes from CIFCL.
That's why his business is very important for the company.
Coming to CIFCL, the company is geographically well-diversified.
The company has a vast network of 1,142 branches which are available in 29 states.
The company is one of the largest asset finance NBFCs in India in terms of the vehicle finance portfolio.
Vehicle finance contributed 72% of the total AUM in FY21.
Its new and used vehicle segment has a strong market share in the KAI product line such as light commercial vehicles, heavy commercial vehicles, cars, and multi-utility vehicles.
A major concern for the company is the source of revenue.
The main source of revenue for the company comes from its investments.
The company has to rely heavily on dividends from its holding company.
If the poor performance of the holding company in a particular year resulted in lower or no dividends, it can have a direct impact on the company's profitability and margins.
As you can see on your screen, we have shown some key financial and technical ratios of the company.
The third company on our list is Tanla Platforms Limited.
Tanla Platforms is a cloud communications provider that connects businesses with customers.
This company holds a 70% market share of India's automated SMS traffic through its platform Trubloq.
Tanla Platforms' 5 Year Sales Growth CAGR of 40.80%.
The biggest strength of the company is its tech platform structure, due to which increasing revenue gives a good economy of scale.
So the company does not have to invest again and again and through a fixed investment, they can scale their revenue.
There has been a good improvement in its margin.
Their 3-year sales CAGR is 47% but their 3-year PAT CAGR is 182%, which means their profit margins are growing rapidly.
The company's major weakness is its excessive reliance on the SMS medium.
In the last 3 years, 96-97% of revenue came from messaging services for Tanla.
If there is a disruption in the SMS segment or some other medium has replaced SMS for business-to-customer communications, it could have a negative impact on Tanla's business.
As you can see on your screen, we have shown some key financial and technical ratios of the issuing company.
The fourth company is Orient Electric Limited.
Orient Electric is a leading consumer electrical company in India with a portfolio of fans, lighting, home appliances, and switch gears.
Orient Electric is the second largest fan manufacturer in India and also the largest fan exporter in India.
Orient Electric has a 5-year sales growth CAGR of 63.13 percent.
The company has a very strong distribution network.
The company has 5000 dealers and 125000 retail outlets in 450+ cities.
Orient Electric's strategic tie-up with Italy-based DeLonghi Group brings good opportunities for the company.
Through the company's tie-up, DeLonghi Group sells premium international products in the Indian market.
Due to the tie-up, the company has the power to expand its offerings by better matching the emerging trends in the consumer durables market of India.
The company's major weakness is the volatility in the cost of raw materials used in its production.
The prices of commodities such as silicon sheets, copper rods, steel, and aluminum remain highly volatile.
If the rising input cost of the company is not able to pass on to the consumers, then it will have a direct impact on the profits of the company.
Now you may see some major financial and technical ratios of Orient Electric Limited on your screen.
The fifth company on the list is EKI Energy Services Limited.
It is involved in the business of Climate Change Advisory Services, Carbon Credit Trading, Business Excellence Advisory, and Electrical Safety Audit.
Let us understand the consultancy service of EKI Energy with an example.
No company can emit more than a certain amount of carbon.
In the example shown on the screen, Company B's carbon emissions exceeded the limit.
So that carbon credit is buying power from Company A, which is emitting less carbon than the mandated level.
In this complete process, EKI Energy Services provides consultation and advisory services.
EKI Energy Services also provides related advisory and consultancy services if a company wants to reduce its carbon emissions.
EKI Energy handles the entire process including maintaining carbon credits to global standards, legal formalities, and trading of credits.
The company offers its services to 40+ countries.
The 5-year sales growth CAGR of EKI Energy Services is 228.58%.
Its biggest strength is growing climate change awareness across industries globally as well as an increasing focus on environmental, social and governance (ESG).
Due to this, the demand for the services of the company is increasing rapidly.
Furthermore, trading carbon credits is a complicated process.
In such cases, the demand for the services of the company increases even more.
The company is generating significant revenue from carbon trading and the company's sales have grown rapidly in the last 3 years.
The company's revenue has grown by 843% in the last year and there has been a significant improvement in operating margin as well.
But the demand for EKI Energy's services depends on the particular industry and the seriousness of the client company to comply with the ESG norms.
Voluntary ESG compliance of an industry/company is likely to decline in the absence of any mandatory norms.
So, there is a possibility of uncertainty in the demand for the company's services going forward.
In addition, carbon pricing is directly dependent on the demand and supply of carbon credits.
Due to increased supply or demand for carbon credits, there could be a negative impact on the company's pricing, which in turn could hamper the company's margins.
As you can see on your screen, we have shown some key financial and technical ratios of the issuing company.
So these were the 5 growth companies that are underrated in comparison to their industry.
We remind you that this video is for educational purposes only, and is not a buy or sell recommendation of any kind.
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