Low Priced Penny Stocks to Buy in India in 2017

What are low priced stocks? Are penny stocks low priced? In stock investing it is important to define ‘low price’. General understanding is; Rs.100 IS greater than Rs.50. But it can be different in case of stock investing. A stock which is trading at Rs.100 can be considered cheaper than a stock trading at Rs 50.

How this is possible? It is a violation of the theory of mathematics, right?

But this is what makes stocks investing so interesting.

The puzzle of low priced stocks becomes even more interesting when we are dealing with penny stocks.

My readers often ask about best stocks to buy in India in 2017. It is evident that people love penny stocks.


What are penny stocks?

Any stocks which has very low market price are referred as Penny Stocks. People love penny stocks because of its low market price.

Penny stocks are very light on our pocket. Low price per share makes it possible for people to buy more shares without spending too much money.

To understand more about penny stocks, lets take an example.

There is a stock in Indian stock market called MRF Limited. We all know it, right? Sachin Tendulkar has batted for years with a cricket bat having MRF name imprinted on it.

Yes I am taking about this MRF Limited. This company basically makes tyres, tubes, paints, conveyor belts, toys etc. This company is also listed in BSE and NSE.

Do you know, what is the market price of MRF Limited in BSE? It trades at Rs.64,3330 per share.

So if you want to buy ONE share of MRF, you will have to shelve almost 65,000 rupees. You will do it? Even if the market price of MRF is undervalued, it will not be easy.

High market price of MRF, makes it nearly impossible for a common man to buy its shares.

But penny stocks are such shares which are like “tailor made for common men”. Why? Because of its very low market price.

Low market price makes it very attractive and convenient for common men to buy penny stocks.

But it must also be noted that because of its very low market price, penny stocks are extremely volatile.

Penny stock are very volatile

Penny stocks to buy India - beta

What it means by penny stocks being volatile?

To measure stocks volatility, there is financial term called Beta. The higher is the beta, more volatile is the stock price.

Market price of very volatile stocks fluctuate too rapidly.

Market price of low volatile stocks are comparatively steadier.

Very volatile stocks has high beta. Low volatile stocks has low beta.

Stocks having beta more than one, means market price of this stock is more volatile compared to the Index (like Sensex or Nifty).

Suppose a stock has beta of 1.3. It means, if Sensex moves down by 10%, its stock price is likely to go down by 13%. Similarly if Sensex goes up by 10%, stocks price (of beta 1.3) is likely to go up by 13%.

As market price of penny stocks move more rampantly compared to the index, hence it is often referred to as risky and volatile.

So investors must take extra care while investing in penny stocks.

Penny stocks to buy having low market capitalization?

Though I am not an expert of penny stocks, but according to me taking a calculated risk with penny stocks is better.

So what I do when I have to deal with penny stocks?

I buy low prices penny stocks having comparatively larger market capitalization.

If someone does not have too much exposure in the stock market, investing in low cap penny stocks can be very risky.

There is a difference between how a traders looks at penny stocks and how an investor must look at these stocks.

Being an investor, we must handle penny stocks differently.

One step in doing so is to, opt for higher market cap penny stocks.

The second step will be look deeper into the business fundamentals of their business.

How investors look at penny stocks?

If fundamentals are bad, no matter how low is its market price, investors will avoid such stocks.

This is a reason why expert investors never looks at market price of stocks in isolation.

The trading price that we see can often be very misleading. Always perform ‘stock valuation’ before buying one.

It will be only after stock valuation that one can identify Rs.100 stock as cheaper than Rs.50 stock.

Low priced stocks are those stocks which are trading at discount to its intrinsic value.

But it is not easy to estimate intrinsic value of stocks.

There is an easier alternative available to check if stocks can be tagged as low priced stocks. We can use financial ratios to evaluate if a stock is trading at cheaper price.

These financial ratio is a great tool for common people who are not very conversant with analyzing financial statements.

Even if the market price of stock is very low, even if it have comparatively higher market cap, all stocks must pass through the screening of financial ratios.

Which financial ratios can be used to identify low priced stocks?

Price Earnings Ratio (P/E)

Price earnings ratio (P/E) is one of the most used valuation tool in stock market. It compares market price of stock (P) with its Earning Per Share (E). As a rule of thumb, P/E ratio multiple of 15 is considered reasonable.
Price Earnings Ratio = P/E
P=Market Price, E=(PAT-Dividend Paid on Preference Shares)/(No. of Shares)

Price to Book Value (P/B)

Price to book value (P/B) is again one of the most followed financial ratio of stock market. It compares market price of stock (P) with total shareholder’s equity per share / book value per share (B). As a rule of thumb, P/B ratio multiple of 1.5 is considered reasonable.
Price to Book Ratio = P/B
P=Market Price, B=Book Value per Share / Net Worth Per Share = (Share capital + Reserves)/No. of Shares).

Dividend Yield (D/P)

Dividend yield is one of the most reliable stock valuation tool available for investors. It compares market price of stock (P) with dividend/share paid to shareholders(D). As a rule of thumb, D/P multiple of more than 0.03 (3%) can considered reasonable.
Dividend Yield = D/P
P=Market Price, D=Dividend paid per share in last FY.

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PEG Ratio

PEG ratio is an extension of P/E ratio of stocks. We discussed that P/E ratio of less than 15 is considered reasonable. But in calculation of PEG, companies earning growth rate (EPSG) is considered for valuation.

A fast growing company will be considered reasonable even it P/E is high. As a rule of thumb, PEG multiple of less than 1 is considered reasonable. If purpose is to find low priced stocks, PEG ratio is one of the most reliable tool.

Price Earning Growth Ratio = (P/E)/EPSG

P=Market Price, E=(PAT-Dividend Paid on Preference Shares)/(No. of Shares), EPSG=Earning Per Share Growth Rate in last 3 year (5year growth can also be considered).

Price to Sales (P/S) Ratio

Price to sales ratio is same as P/E ratio. Here instead of using earning as comparator one uses sales turnover. Companies PAT figures can be manipulated in financial statements. But sales turnover is hard to manipulate.

These days expert investors consider P/S ratio as more authentic than P/E ratio. Low P/S ratio will provide better valued stock than a low P/E stock. As a rule of thumb, P/S multiple of less than 1.5 is considered reasonable.

If purpose is to find low priced stocks, P/S ratio is a very good tool.

Price to Sales Ratio = P/S

P=Market Price, S=Sales Turnover.

 

Conclusion – What are Low Price Penny Stocks?

In this blog post, we will consider those penny stocks which trade at a market price of Rs.30 and below. .

We will consider only those low price stocks which are undervalued. We will use the above ratios to judge if the stocks is undervalued or overvalued.

Famous stocks like Apple, Microsoft, Google, Exxon Mobil etc are hardly available at undervalued price levels.

But if easier to find penny stocks which are undervalued.

Lets make our own list of penny stocks and start tracking their price movements.

Looking only at price is not useful. Comparing market price of stocks with its sales, earnings (Profit), earning growth, net worth, operating cash-flow etc gives great insights.

Low Priced Penny Stocks to buy in India in 2017

(Updated: November’2017)

Size of Company and its Debt Levels

SL Company Sector Size of Company Market Cap (Cr) Enterprise value Minus Market Cap (Negative is better) Debt Equity Ratio
1 Ajanta Soya Ltd. FMCG-Vanaspati Small 79.44 -39.67 0.03
2 R Systems International Ltd Technology-Computer Software Small 497.05 -120.65 0.01
3 Pasupati Acrylon Ltd. Textiles-Synthetic Yarn Small 209.46 -25.81 0.25
4 Ace Software Exports Ltd. Technology-Computer Software Small 10.04 -2.78 0
5 Rainbow Foundations Ltd. Construction-Real Estate Small 12.9 122.33 9.16
6 KG Denim Ltd. Textiles-Cloth Small 157.77 107.91 1.26
7 PTL Enterprises Ltd. Services-Trading Small 342.19 -16.52 0
8 Alpa Laboratories Ltd. Healthcare-Drugs & Pharma Small 63.23 -25.97 0.1
9 Electrosteel Castings Ltd. Metals-Steel Tubes & Pipes Small 1110.13 1685.95 0.78
10 Shree Steel Wire Ropes Ltd. Metals-Steel Wires Small 5.36 -1.2 0

Profitability and Growth

SL Company Operating Margin (%) ROE (%) 5 Year Revenue Growth 5-Year EPS Growth 5 Year Book Value Growth
1 Ajanta Soya Ltd. 1.83 19.15 13.63 89.28 7.34
2 R Systems International Ltd 14.17 20.63 7.51 26.6 6.94
3 Pasupati Acrylon Ltd. 15.3 32.51 3.12 42.68 22.95
4 Ace Software Exports Ltd. 18.96 5.14 27.03 15.76 4.08
5 Rainbow Foundations Ltd. 26.43 12.22 28.6 35.68 8.98
6 KG Denim Ltd. 11.52 26.6 10 32.93 16.13
7 PTL Enterprises Ltd. 94.97 26.75 4.56 11.85 14.86
8 Alpa Laboratories Ltd. 15.94 0.99 3.54 61.02 0.44
9 Electrosteel Castings Ltd. 19.33 3.85 0.17 50.05 7.32
10 Shree Steel Wire Ropes Ltd. 10.14 6.11 13.74 18.44 10.31

Price Valuation

SL Company Price Market Cap / Free Cash Flow (Lower is better. Negative is not good) Enterprise Value / Ebidta Price / Sales Current PE PEG (5Y) P/B
1 Ajanta Soya Ltd. 49.15 3.09 2.95 0.12 11.04 0.12 1.85
2 R Systems International Ltd 40.95 11.65 5.81 0.85 12.70 0.48 1.73
3 Pasupati Acrylon Ltd. 23.60 18.41 3.59 0.44 10.95 0.26 1.68
4 Ace Software Exports Ltd. 21.45 5.31 4.45 1.30 9.03 0.57 0.55
5 Rainbow Foundations Ltd. 23.40 0.54 10.14 0.19 4.54 0.13 0.84
6 KG Denim Ltd. 61.00 5.27 4.04 0.26 10.03 0.30 1.53
7 PTL Enterprises Ltd. 52.60 13.54 5.78 6.48 10.06 0.85 2.18
8 Alpa Laboratories Ltd. 32.15 3.78 3.15 1.10 13.98 0.23 0.62
9 Electrosteel Castings Ltd. 31.15 4.38 7.74 0.60 16.22 0.32 0.39
10 Shree Steel Wire Ropes Ltd. 16.20 5.76 3.54 0.48 7.15 0.39 0.56

Historic Returns

SL Company Sector Market Cap (Cr) Return for Investors in Last 5 Years Return for Investors in Last 10 Years
1 Ajanta Soya Ltd. FMCG-Vanaspati 79.44 43.70 21.02
2 R Systems International Ltd Technology-Computer Software 497.05 18.66 16.17
3 Pasupati Acrylon Ltd. Textiles-Synthetic Yarn 209.46 44.75 19.00
4 Ace Software Exports Ltd. Technology-Computer Software 10.04 16.00 4.17
5 Rainbow Foundations Ltd. Construction-Real Estate 12.90 18.61 1.94
6 KG Denim Ltd. Textiles-Cloth 157.77 32.74 14.06
7 PTL Enterprises Ltd. Services-Trading 342.19 14.21 10.48
8 Alpa Laboratories Ltd. Healthcare-Drugs & Pharma 63.23 24.88 -2.38
9 Electrosteel Castings Ltd. Metals-Steel Tubes & Pipes 1,110.13 2.75 -6.76
10 Shree Steel Wire Ropes Ltd. Metals-Steel Wires 5.36 18.15 10.01




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Mani

I am a Blogger with a passion for Investment Education. I started blogging in 2007-08. Those where the early years when I went on the family way.

Blogging didn’t happened to me as a coincidence. It was a very conscious decision. I started blogging as a process to build a new hobby and also learn a new skill of personal finance management.

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39 Comments on "Low Priced Penny Stocks to Buy in India in 2017"

  1. Ashok Kumar Agarwalla | October 18, 2017 at 9:12 pm | Reply

    Very very authentic evaluations

  2. The information given above sounds good.

    I started investing few yrs. ago. Now I m 70. I would like to invest generally for long term (a yr. or more).If however, any attractive trading scrips I come across, I don’t mind investing partly in short term too (few days to a year).

    Look forward to some suggestions , please.

    Thanks

    Menghani

  3. Susanta Kumar kar | September 11, 2017 at 8:24 pm | Reply

    Your blog is esteem. It is an excellent guide for novices in capital market.

  4. Hi Sir,
    Wanted your advice on how to choose good stock for investment and what all things to check before buying.
    Also could you please let me know your thoughts on the following shares
    1. IDFC Bank
    2. Edelweiss
    3. NBCC

    Regards
    Biju

  5. I am profiting in share market simply by studying the charts. Your explanations about the ratios is simple and easy to understand. These ratios will improve my picking the stock. Thanks

  6. Gopalakrishnan B Chettiar | July 9, 2017 at 7:21 am | Reply

    What a superb collative of various ratios. However, how to correlate each other prior deciding to select to buy the stock is not detailed. Of course, we do understand that spoon feeding cannot be done at each stage, but detailing how to correlate the ratios to buy a share would be a paramount guidance to novices, who are sincerely read and follow your esteem blog.

  7. Rajendra sahu | July 5, 2017 at 8:25 pm | Reply

    Looking to invest in best penny stock. Can any one would give better recommendation for best stock and which price brand would be (1-10)

  8. SANJEEV KUMAR SINHA | June 29, 2017 at 11:38 am | Reply

    I wish to buy the low CMP Stocks which are fundametally super strong & are bound to go up in its prices over time.
    Can you pls advise 5-7 such potentially milti bagger kind of Stocks which I can retain for 7/10 yrs & get a good compounding returns?
    Thanks
    Sanjeev Sinha

  9. Very informative and good guidance to assess penny stocks.

  10. Any stock to be bought

  11. Hiii…its good to see all the comments. I want to invest money. Which share should i buy..

  12. Your work is great to us

  13. @ranjit kamble,
    Please go for Chennai Petro(CMP about Rs 385/=,dividend yet to be declared,but may be high) and PFC(Interim Dividend of Rs 5/= declared,ut EPS is quite high,CMP about Rs 162/=).Use stop-losses.

  14. @arun,
    Please Buy Aswini Gujral’s Book,on this subject.But it is very risky for beginners to day-trade.Even then some suggestions,may be of help:-
    1.Ensure that YOU have BOUGHT a House of yor own,as Roti,Kapda,Makhan are TOP, priorities in Life.
    2.Have at least a year’s capital for the necessities
    3.Day trade with 10% of the extra Cash you have,so that in case of losses,you live to fight another day!
    4.Trade only in a Bull Market(which is about 30% of the time,as per Shri Gujral) or Bear Market.Use Technical Analysis Tool available in Moneycontrol dot com
    5.Use ADX to find whether a market is Bullish or Bearish
    6.Then you can use MACD to trade in a Bear market.
    7.Follow trends,as TREND IS YOU FRIEND.
    8.Choose stocks which are trading in huge volumes.
    9.Have a 1% stoploss
    10.In case of profit,use trailing stop-losses.
    11.In the beginning,use ONLY small amounts to Trade.As you gain experience,you can go full throttle,with 10% of your extra cash.
    In the case of investing:-
    1.Choose Debt-free Cos.
    2.Enter when the Market is in relatively Bear phase
    3.Choose stocks with HIGH EPS,CashFlow.
    4.Track the strength of the Rupee,Crude price.These will help you in your choice.
    5.One trick is to use Stocks to hedge other stocks.
    For example buy OMCs like Chennai Petro,IOC,HPCL,BPCL et nd hedge with Oil producers like ONGC,Oil India etc.Buy Physical Gold and Hedge with Jewelry stocks,like PC Jeweler.
    6.Spend about 5 hours daily,visitng many top Indian sites and using search engines
    7.Buy Low,Sell Dear,dear
    8.START A BLOG ON STOCKS,INVESTING via Blogger,wordpress,etc

  15. Chennai Petro (Bumper Profit,EPS about Rs 60 for the first three Qs,due to cheap Crude and strong Rupee)and Power Finance Corporation (Interim Dividend rs 5/= declared for 2016/17)are hot now.

  16. Hi,

    I’m new to stock market and your blog is really useful and informative. It would be great if you can write about how to do Intraday trading or basics , factors to watch for etc .. Thanks in advance .

    Regards,
    Madhu R

  17. Prafulla Ranjan | March 16, 2017 at 9:10 pm | Reply

    Should Suzlon Enery be bought at current price for a time horizon of 2-3 years?

  18. Can mahindra financial services be bought now

  19. i want to purchase a low amt shares with high quantity for long period ..please suggest the name of share between 50 to 100 rupeez required share value..

  20. Amazing sir thanks a lot for ur beautifull guidance….

  21. Prakash Alagannavar, Chikodi, Karnataka | December 16, 2016 at 10:44 am | Reply

    Quite educative. Thanks.

  22. good informatation

  23. Sir,I read ur blog.It is really informative and can guide investors.
    G D Mishra

  24. Very informative

  25. Nizarali Mahesania | August 12, 2016 at 10:03 am | Reply

    Sir, your is very informative and excellent, i have no words to express my gratitude !!!
    I like to buy “Stock Analysis Worksheet” costing INR 345 to evaluate low price stocks as discussed in above blog, how can I buy this product ONLINE by using netbanking
    pls help me
    regards, nizar m

  26. SIR
    ITS NICE and VALUABLE PRESENTATION.

  27. Hi, your blog is very much useful. Superb fr undwrstanding. Can u advice how to trade “intraday” safely & profitably….? If u explain with sbi cap it will be more better.

  28. Low-priced stocks are something that I tweet about on a regular basis. I frequently flag high-probability setups, stocks under 10 breakout candidates and low-priced stocks that are acting technically bullish.

  29. Sir,

    Could you please show the calculation for all the ratios of any one of the company above (say for Wipro Ltd)? Because I couldn’t understand the math here. Where did u get the base values like Market Price and Sales figures (Moneycontrol ?)

    Regards,
    Ramith

  30. Thanks for your kind information and service.

  31. Pleas madhu don,t go for intraday it never beneficial

  32. Hi,

    I’m new to stock market and your blog is really useful and informative. It would be great if you can write about how to do Intraday trading or basics , factors to watch for etc .. Thanks in advance .

    Regards,
    Madhu R

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