Table of Contents
Why is ITC PE ratio low?
ITC’s lower valuation is due to the hangover of its slow-growing tobacco business and the losses it incurs on its fast-growing non-tobacco FMCG business.
Why do FMCG stocks have high PE?
The P/E ratio of FMCG stocks and pharma stocks normally tend to be high because they have shown consistently high levels of growth and ROE. That is because the online stock market is building in very aggressive sales growth over the next 5 years, aggressive growth in ROE and reduction in debt.
Are stocks with low P E ratios always better?
So, is a stock with a lower P/E ratio always a better investment than a stock with a higher one? The short answer is no.
The simple reason behind this is that ITC’s FMCG brands are relatively much younger. While the likes of Britannia have been in business since Gandhiji’s times, ITC forayed into FMCG much much later, only in the 2000s.
WHAT IS GOOD P B ratio in India?
A PB ratio of 1 is a good PB ratio for stocks. However, PB ratio up to 3 is acceptable.
Is a high P B ratio good?
A company with a high P/B ratio could mean the stock price is overvalued, while a company with a lower P/B could be undervalued. However, the P/B ratio should be compared with companies within the same sector. The ratio is higher for some industries than others.
Is a stock with a lower P/E ratio always a better investment?
So, is a stock with a lower P/E ratio always a better investment than a stock with a higher one? The short answer is no. The long answer is that it depends on the situation. Read on to find out more about price-to-earnings ratios, how to interpret them, the difference between a low and a high P/E ratio, and which one is better.
Why do commodity companies have lower PE ratios than other sectors?
This is very specific to commodities like steel, aluminium, copper, oil etc. Normally, you will find that these commodity companies tend to command lower P/E ratios compared to sectors like automobiles, IT, FMCG or pharma. That is because, there is not much to differentiate and price is the only factors.
What is the relationship between P/E ratio and return?
Historically, the lower the P/E, the higher the return. When you pay a lower P/E, you’re paying less for more earnings and, as earnings grow, the return you achieve is higher. In periods of low inflation, the return demanded by investors is lower and the P/E higher.
What is the P/E ratio of the Nifty?
From the above chart it can be gauged that the P/E Ratio of the Nifty has been shifting from as low as 15X earnings to as high as 25X earnings. Of course, these are yearly averages and markets have seen much greater volatility during the year.