P/E scoreboard: 104 firms crack centuries

_____________________________________
P/E scoreboard: 104 firms crack centuries
ARNAV PANDYA

TIMES NEWS NETWORK [ FRIDAY, JUNE 03, 2005 12:11:52 AM]


A bull market sees rising valuations as share prices remain buoyant. However, investors need to be cautious enough to ensure they are not buying into grossly over-valued shares. One of the common ratios considered while arriving at some conclusion about valuation is the price/earnings (P/E) ratio.

An analysis of the P/E ratios of more than 2,600 companies by the ET Intelligence Group shows about 104 had a P/E of more than 100 as on May 31, '05. The P/E ratio is calculated by dividing the market price per share by the earnings per share of the company.

There are several ways in which the P/E can be calculated, depending on how the EPS is calculated. Here, the ratio is calculated by taking the earnings of the previous four rolling quarters into consideration. Many companies across sectors have a figure of over 1,000.

The busy stretch of the P/E road is in the 201-300 range and lower. In the 201-300 range, a record 22 companies find place. These include Remsons, IQ Infotech, Supriya Phar, Essar Oil, Cosco (I), La Mere App and Rich Capital. u Investors need to watch out for overvaluation: P 4

The next batch, which is in the 101-200 P/E range, includes Mukta Arts with a P/E ratio of 172. Shringar Cinema also belongs to this list with a P/E ratio of 162. Bhansali Engineering, Kale Consultants, Baffin Engg, Bharat Imm, Hatsun Agro and HMT and Birla Ericsson are some of the other names in this category.


Some of the other companies with high P/E ratios include Hind Bio-Science (P/E 850), SWIL (P/E 734), Uniroyal Textile Industries (P/E 697), BlueChip (India) (P/E 669) and Rockwool (P/E 648). There are four companies in the P/E range of 501-600 and 7 in the P/E range of 401-500.

Two known companies that have P/E ratios in the high 300s are Vindhya Tele and Patel Roadways. Vindhya Tele recorded a profit of Rs 0.4 crore on a turnover of Rs 90 crore, while Patel Roadways registered a profit of Rs 0.1 crore on a turnover of Rs 121 crore. Videocon Industries and Bhagwati Gas also fall in the 300 plus P/E range.

Companies that are expected to perform quite well usually get a slightly higher P/E than their industry counterparts. At the same time, too high a P/E may indicate that there is an element of over-valuation in the market. One must note that looking at P/Es across companies is not strictly comparable and hence, the data presented here should not be considered in isolation to determine the valuation of the company.

Among the 1000 plus P/E companies, Agro Tech Foods, for example, has a P/E of 2140. The share price of the company is around the Rs 85, but the main reason for the very high P/E is that it has a marginal profit of Rs 0.1 crore due to which the ratio is very high. The company's P/E shot up as the latest results brought down the earnings per share. Earlier, the P/E of the company was 118.

Another well-known company with a high P/E is the Aditya Birla Group-controlled UltraTech Cement. It has a P/E of 1413, mainly on account of the fact that the net profit of the company is very low.

Other companies that find themselves in the 1000 plus P/E range are Osian LPG Bottling with 1383, followed by Tanfac Industries at 1340. Osian LPG Bottling has a small profit and its price has been in the Rs 15-17 mark over the last month.

Many of the companies in the list would be unknown to many investors. The list includes Mega Corporation (P/E 1288), Gujarat Terce Laboratories (P/E 1285), Fast Track Entertainment (P/E 1257) and Artillegence Bioinnovations (P/E 1018).

Most of them show a very high P/E because of their marginal profits. There also exist several companies with no P/E ratio in the technical sense because they have experienced losses for the last four trailing quarters. Some of the companies in this category are Jagatjit Industries, TTK Healthcare, Goodricke, Ceat, Swan Mills, Petronet LNG and EIH Associated Hotels.