"When people have higher expectations of growth, if that materialises, then some high PE stocks will appear at normal valuations after a few years," says Rikesh Parikh, vice-president (equities) at Motilal Oswal. So, what are they seeing in the stock?Įxperts say valuation parameters depend on the type of sector and the outlook for growth. That seems a sky-high price to pay by traditional valuation yardsticks. The Just Dial stock, quoting at Rs 1,603, is surging forward, even at a trailing PE of 103. While some people see value in BHEL, others see it in Just Dial. A slowing economy and sluggish order books has seen most of these stocks tumble to a lower single-digit PE ratio.Īt the same time, there are stocks quoting at a very high PE ratio. However, most are bouncing back as investors and fund managers seek more value from the market. Why did investors suddenly spot an opportunity here?Įngineering, construction, mining and metal companies were seriously out of favour last year. Its PE has gradually expanded and investors who bought at that price are now sitting on gains of nearly 83 per cent, as this debt-free company is currently quoting Rs 183.70. Value seekers soon began spotting an opportunity in BHEL and started buying the stock. That was a nine-year low for the engineering giant. While ITC and Hindustan Unilever were expanding their price-to-earnings (PE) ratio, BHEL's PE began sliding and at one point, dipped below five times earnings in August 2013, when its stock hit a low of Rs 100. Since the beginning of 2103, the stock lost 55 per cent till August as investors sought out other growth opportunities. Take Bharat Heavy Electricals Ltd (BHEL), for instance. However, in the fourth quarter of 2013, stocks that were beaten down and slow-growing started making a splashing comeback. But what is it really?įor the better part of 2013, investors were ignoring traditional valuation indicators and going for companies with a great revenue potential or where the market opportunity seemed huge. The stock market is dancing to the value tune these days.
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