Low PE Stocks in India with its PEG

When it comes to selecting stocks, probably people love to look at a list of top low PE stocks.

The use of stock valuation tool, the Price to Earning Ratio (PE), is one of the most used stock valuation tool after EPS.

PE ratio is one of those calculations about stock valuation that is easiest to do.

In most cases, one need not calculate PE ratio of stocks. It is readily available on internet.

Nevertheless, calculation of PE Ratio of stock is simple.

But we must understand well how to effectively use PE ratio for stock valuation.

For some, PE ratio of stock is a complete valuation tool. For others, it serves very little purpose.

Due to this varied opinion PE is also the most misused tool.

It is true that there is no ratio which speaks as loudly about stock valuation as PE ratio. But is PE ratio in itself complete? One must use it in combination with other financial ratios?

Surely, isolated use of PE ratio is not advisable. But no way one can diminish the utility of PE ratio. Even today, a lot of people start their screening process from low PE stocks.

As a starting point, preparing a list of low PE stocks is advisable. Once this list is ready, a detailed fundamental analysis of individual stock is a must before investing.

In this post we will see a method to use PE ratio more effectively.

Earning Per Share (EPS) is PAT per share of last financial year (trailing EPS).

PE ratio seen on internet are calculated using trailing EPS. Market price divided by EPS gives us the PE ratio of a stock.

Theoretically, PE ratio of stocks should be below 15. Stock with PE above 15 can be considered overvalued.

This is a universal rule? No.

It is essential to look beyond the PE15 rule.

There can be a condition where PE ratio of a stock is above 15, but still it is undervalued.

You are surprised? Yes I can understand. When I first read about this, I was both surprised and confused.

I was surprised as I didn’t expected someone to tell me this fact. I was confused as this one statement made me doubt everything that I have learnt about stock valuation.

In this article we will dig slightly deeper into the concept of low PE stocks.

Low PE Ratio Stocks India

What it means when stocks are trading at PE ratio of 15,20,25,30…?

Market price of stock is directly related to its EPS.

Suppose two stocks A & B has same EPS of 5. But PE ratio of A is 15 and that of B is 25. It means, B is more overvalued than A.

PE is the first hint to investors about the stock’s valuation.

But for trained investors, what is more important is why PE ratio of of any stock is high or low?

For blue chip companies, PE ratio generally trade at very high levels. Why?

Because, future EPS growth rate of blue chip companies are more predictable. Hence investors are ready to pay higher price to buy their stocks.

But does this mean that all high PE stocks have predictable future growth? No.

Speculative factors also push market price of stocks high. Hence, we can say that irrespective of PE ratio being high or low, one must not take the investment decision based on PE ratio alone.

Important is to looke deeper into the PE ratio.

When we are looking at PE ratio, we must also understand why PE ratio of this stock is high or low.

Q1: If stocks PE ratio is high due to its high growth potential, or due to speculative forces?

Q2: If stocks PE ratio is low due to its diminishing growth potential, or due to speculative forces?

Answering these questions before committing to a stock is essential for investors.

When speculative forces dominate, stock price touch unreasonable levels. It is investors responsibility to evaluate, if speculative forces are dominant on a stock pricing.

Here will talk more about low PE stocks. Idea is to learn to evaluate if low PE stocks are good buy or not.

Low PE stock, with weak fundamentals is not interesting.

Low PE stock which also has strong fundamentals can be a great contender for investing.

Why we need PE ratio?

Looking at market price of stocks is not enough

There are people who buy/sell stock by looking only at its market price. This is like investing blindly.

Looking at PE ratio, to value a stock, is at least better than looking only at its market price.

What a PE ratio does is this, it checks how high is the market price of a stock compared to its EPS.

Suppose there are two stocks A and B. Both has a market price of Rs.100. Stock A has EPS of 10, and B has EPS of 15.

Hence PE ratio of the two stocks is as follows:

  • PE (A) = 10.00 (100/10)
  • PE (B) = 6.66 (100/15)

After we look at the PE ratios of A and B, it is giving a clear hint that B is better valued than A.

What is important here is to note that, how comparing PE of A and B gave us an idea of which stock is better valued.

We need PE ratio to compare price of two stocks and arrive at a conclusion.

The company with lower PE ratio is better priced than the others.

PE Ratio alone is not Enough…

Frankly speaking, just by looking at PE ratio of stock, says too less about the stock valuation.

So what is the alternative? Do a more detailed analysis.

Factoring in a another stock metric can greatly enhance the utility of PE ratio.

Embedding in the PE ratio, the EPS growth rate, will give more understanding about the stocks true valuation.

Lets take an example:

There are two Stocks ABC and XYZ. Metric of these two stocks are as below:

  • Market Price (ABC) : Rs.100
  • EPS (ABC) : Rs.5
  • PE (ABC) : 20
  • Market Price (XYZ) : Rs.50
  • EPS (XYZ) : Rs.2.5
  • PE (XYZ) : 20

Which stock is better valued?

As PE ratio of both ABC and XYZ is identical (at 20), it is like impossible to judge which is better priced.

So what to do now?

We can analyze ABC and XYZ based on their growth potential.

One of the important parameter that tells us best about the future growth prospects of a stock, is its historic EPS growth rate.

Peter Lynch says, a fast growing stock can afford a higher PE ratio and still remain undervalued.

Suppose the EPS growth rate of ABC is 18% per annum, and that of XYZ is 22% per annum.

Dividing PE with EPS growth rate will give a value which is termed as PEG ratio.

Lets calculate the PEG ratio of ABC and XYZ.

  • PE (ABC) : 20
  • EPSG (ABC) : 18
  • PEG (ABC) : 1.11 (20/18)
  • PE (XYZ) : 20
  • EPSG (XYZ) : 22
  • PEG (XYZ) : 0.91 (20/22)

Which stock is better priced?

As a rule of thumb, a stock which has a PEG of below one (1) is said to be undervalued. Comparatively, lower PEG means better valued.

In our example, as PEG of XYZ is lower (0.91) than PEG of ABC (1.11), hence B is better valued than A.

Final Words…

Use PE ratio as a tool to value good stocks.

Calculate Price Earning Ratio (PE) easily by dividing market price of a share with its EPS.

How this PE ratio is helpful for investors?

Market price of a stock will tell only about how much a stock is valued by the market. It is just a speculative indicator of valuation.

EPS tells us how much profit the company has generated per share.

A combination of market price of a stock and its EPS gives us PE ratio.

Generally market always overrates good stocks. Use PE ratio to gauge stock’s true value.

There is so much fuss being created about undervalued and overvalued stocks, why?

Undervalued stocks makes money for its investors. While investing in overvalued stocks leads to losses.

It is essential for stock investors to avoid overvalued stocks.

Use of low PE ratio along with PEG ratio, is a great way to identify undervalued stocks.

A stock which is trading at low PE ratio (of say below 15) and also has a PEG below 1, makes it very interesting for value investors.

Low PE Stocks in India with its PEG Ratio

(Updated as on December’2017)

SL Company Sector Size of Company (M.Cap) Price Market Cap (Cr) PE PB PEG (5Y) Dividend Yield (%)
1 Rural Electrification Corpn. Ltd. Financial - SIDCs/SFCs Large 154.75 30,463.11 5.45 0.87 0.31 6.26
2 NLC India Ltd. Energy - Electricity Generation Medium 105.40 16,111.11 4.32 1.26 0.31 6.96
3 Reliance Capital Ltd. Financial - Equipt.Leasing Medium 433.80 10,951.57 9.01 0.76 0.50 2.42
4 Dalmia Bharat Sugar and Industries Ltd. FMCG - Sugar Small 149.75 1,176.05 6.56 0.84 0.03 1.38
5 Chennai Petroleum Corpn. Ltd. Energy - Crude Oil & Natural Gas Medium 427.00 6,345.86 7.83 1.94 0.10 4.93
6 PNB Gilts Ltd. Financial - Invest.Services Small 47.15 844.25 7.20 0.95 0.14 5.33
7 Indian Metals & Ferro Alloys Ltd. Metals - Metal Tanks & Fabrications Small 597.40 1,604.60 4.65 1.43 0.15 3.36
8 Mangalore Refinery & Petrochemicals Ltd. Energy - Crude Oil & Natural Gas Medium 124.40 21,460.57 6.66 2.26 0.21 4.9
9 Kiran Vyapar Ltd. Financial - Invest.Services Small 144.65 365.34 7.50 0.39 0.17 1.77
10 Balrampur Chini Mills Ltd. FMCG - Sugar Small 160.45 3,753.31 6.49 2.24 0.02 2.19
11 Indian Oil Corpn. Ltd. Energy - Crude Oil & Natural Gas Very Large 390.60 191,079.86 11.97 1.80 0.32 4.83
12 Hindustan Petroleum Corpn. Ltd. Energy - Crude Oil & Natural Gas Large 416.10 63,520.55 10.47 2.77 0.09 4.8
13 DCM Shriram Inds. Ltd. Diversified - Diversified Small 326.70 570.58 4.75 1.48 0.09 3.05
14 Century Enka Ltd. Textiles - Synthetic Yarn Small 331.05 720.52 9.78 0.84 0.16 2.12
15 GHCL Ltd. Chemicals - Soda Ash Small 296.00 2,757.57 6.81 1.89 0.13 1.77
16 PTC India Financial Services Ltd. Financial - Misc. Fin.services Small 37.10 2,379.66 8.10 0.99 0.56 4.05
17 Lloyd Electric & Engineering Ltd. Engineering - Electronic Components Small 283.95 1,141.40 1.44 0.72 0.16 0.53
18 Gujarat Industries Power Co. Ltd. Energy - Electricity Generation Small 134.55 2,006.35 8.36 0.87 0.59 2.04
19 Pincon Spirit Ltd. FMCG - Liquors Small 44.40 204.79 4.14 1.03 0.10 1.75
20 Coastal Corporation Ltd. Services - Trading Very Small 64.55 16.41 1.13 0.29 0.05 2.32
21 Rajshree Sugars & Chemicals Ltd. FMCG - Sugar Very Small 58.65 165.06 5.29 1.05 0.03 1.71
22 Satia Industries Ltd. FMCG - Paper Very Small 135.30 135.30 4.52 0.91 0.10 1.48
23 Cosmo Films Ltd. Chemicals - Plastic Films Small 355.00 675.74 8.62 1.14 0.37 2.88
24 Vardhman Textiles Ltd. Textiles - Cotton & Blended Yarn Medium 1,311.55 7,489.24 11.87 1.65 0.23 1.15
25 Polyplex Corporation Ltd. Chemicals - Plastic Films Small 528.05 1,672.79 10.48 0.67 0.56 1.34
26 PTC India Ltd. Energy - Electricity Distribn. Small 117.10 3,441.10 10.85 1.10 0.72 2.58
27 Dewan Housing Finance Corpn. Ltd. Financial - Housing Finance Medium 629.30 19,346.38 6.41 2.31 0.14 0.65
28 Dhampur Sugar Mills Ltd. FMCG - Sugar Small 289.25 1,878.44 6.54 2.57 0.14 2.12
29 SJVN Ltd. Energy - Electricity Generation Medium 33.45 13,837.02 9.69 1.14 1.27 8.22
30 PBM Polytex Ltd. Textiles - Cotton & Blended Yarn Very Small 117.95 95.93 9.17 0.81 0.13 2.54
31 Star Paper Mills Ltd. FMCG - Paper Very Small 208.50 326.99 5.41 0.86 0.19 0.95
32 Trident Ltd. Textiles - Cotton & Blended Yarn Medium 91.05 4,530.30 14.24 1.62 0.31 1.69
33 Srikalahasthi Pipes Ltd. Metals - Pig Iron Small 409.00 1,624.74 11.21 1.89 0.11 1.47
34 Karnataka Bank Ltd. Financial - Banking Small 156.45 4,390.30 10.11 0.90 1.19 2.57
35 JK Paper Ltd. FMCG - Paper Small 123.20 2,086.92 9.99 1.38 0.39 1.24
36 Hinduja Global Solutions Ltd. Services - Misc.Other Services Small 699.00 1,454.75 7.82 1.02 0.72 1.43
37 Bharat Petroleum Corpn. Ltd. Energy - Crude Oil & Natural Gas Very Large 504.00 109,059.18 15.11 3.33 0.22 4.31
38 Elixir Capital Ltd. Financial - Misc. Fin.services Very Small 41.50 23.21 5.19 0.91 0.09 3.12
39 Prime Property Devp. Corpn. Ltd. Financial - Hire Purchase Very Small 35.85 62.79 10.61 0.66 0.17 2.7
40 West Coast Paper Mills Ltd. FMCG - Paper Small 234.55 1,499.64 7.91 2.08 0.19 1.1
41 Nitin Spinners Ltd. Textiles - Cotton & Blended Yarn Small 107.90 598.58 11.53 1.56 0.06 1.11
42 Seshasayee Paper & Boards Ltd. FMCG - Paper Small 825.00 1,049.71 8.60 1.68 0.31 1.2
43 Vivimed Labs Ltd. Healthcare - Drugs & Pharma Small 118.10 957.69 4.51 1.08 0.18 0.34
44 CESC Ltd. Energy - Electricity Generation Medium 1,014.00 13,439.30 15.41 0.99 0.72 0.99
45 Integrated Financial Services Ltd. Financial - Hire Purchase Very Small 39.70 23.82 5.54 0.64 0.26 3.02
46 Sri KPR Industries Ltd. Chemicals - Plastic tubes & pipes Very Small 27.95 56.31 7.38 0.95 0.23 3.58
47 Sutlej Textiles & Industries Ltd. Textiles - Synthetic Yarn Small 100.00 1,630.91 11.02 1.86 0.29 1.31
48 Great Eastern Shipping Company Ltd. Services - Shipping Medium 398.30 5,994.90 19.05 0.83 0.99 2.54
49 IRB Infrastructure Developers Ltd. Construction - Construction Medium 229.25 8,062.26 9.33 1.48 1.46 2.18
50 GSB Finance Ltd. Financial - Hire Purchase Very Small 9.65 5.79 5.64 0.51 0.14 2.59

* P.Note: P/E Analysis of companies has been done without evaluating companies business fundamentals. It is essential to do fundamental analysis of these companies before buying its stocks.


Disclaimer: All blog posts of getmoneyrich.com are for information only. No blog posts should be considered as an investment advice or as a recommendation. The user must self-analyze all securities before investing in one.

16 Comments on "Low PE Stocks in India with its PEG"

  1. Hey. Great research and advice. I tried to find out low P/E, Low PEG and then I looked into the financials of the company. Hit the bulls eye.
    Waiting eagerly for your updated list of stocks for Month of September/October. Please update or at least send me a few names of the stockes if you don’t have time for a long list.

  2. The site is very interesting, insightful, and informative. Please keep sharing

  3. Great help. Thanks a lot, God bless!!

  4. Ali Miya H Kaldane | March 28, 2017 at 1:19 pm | Reply

    you website is excellent. I really could not find low P/E with low PEG information on any other websites. Congratulations to you. However, the above information should be updated quaterly so that the investors can taking decision based on current data. Thank you

  5. Thanks a lot. You have put your valuable time for this analysis. God bless you

  6. very informative article. God bless you in sharing this kind of valuable info to
    public. A salute to the generous mind.

  7. Bhupendra Shah | July 21, 2016 at 6:46 pm | Reply

    Excellent articles at one place. Thanks a lot.

  8. Can you explain with example how PEG is calculated ? What is full form of PEG ? We shall appreciate if all abbreviations contain full form in bracket first time in articles.

  9. can you guide me whether to purchase IVC @ 17.80 today

  10. Hi

    Can we buy Chennai petroleum stock at current market price. It has 3.7x P/E ratio and 51 EPS.

  11. Hi, Whats the criteria behind finding only the above companies. Do these companies have other things like capital or ROE etc.?

  12. Sir, Please tell me how do you calculate the CAGR or 5-year average EBITDA growth rate.. Which site? I cant find it anywhere..

    • You will not find it anywhere 🙂
      Its a mathematical formula.
      Google it, you will know…

      • Year 2007 2008 2009 2010 2011 2012 2013 2014
        Revenues $13.38 $8.64 $14.64 $17.73 $29.40 $34.50 $43.32 $66.16

        FV $9 $15 $18 $29 $35 $43 $66
        PV $13 $13 $13 $13 $13 $13 $13
        n 1 2 3 4 5 6 7
        CAGR -35.43% 4.60% 9.84% 21.75% 20.86% 21.63% 25.65%
        -51.42% 6.68% 14.28% 31.57% 30.27% 31.39% 37.23%

        Manish ji, I have tried to use the formula in excel sheet as above.. Can you explain PEG ratio in detail. I will appreciate it..

  13. I dont think if i can get the PEG on any other site.. You are awesome!

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