In the search to find value from this fall, we have compiled a list of 10 shares of Trendlyne that are in a manageable PE range where the value of fixed assets is higher than their market value and without a debt / equity ratio of less than 1.
Businesses use fixed assets to generate long-term income. It is stated in the balance sheet at book value less depreciation and impairment costs.
Top 10 stocks that are filtered where the value of the fixed assets is more than the current market value include names like,,,,,,, etc.
Is it possible to classify all the shares as value bets? Maybe not, experts suggest.
“Most of the companies on the list have trades that are volatile in nature. Over the years, these companies have added assets; However, they have not been able to sweat these assets to achieve any significant ROCE (return on capital), “said Siddhart Oberoi, founder of Prudent Equity.
Return on equity (RoCE) means the amount of income or profit that a company generates, taking into account not only equity but also debt and other assets. Read too
“On the whole list are only Tata Steel and
have managed to achieve double-digit profitability, also due to the rise in steel prices over the last two years. Before that, even their return on capital was still bleak, “he said.
At least 7 out of 10 shares have fallen by up to 39 percent so far in 2022. In the traditional sense, a company is considered undervalued if the company’s market value is lower than fixed assets.
However, in reality, this is not always true as net realizable or market value may differ materially from book value.
“You can not ascertain the correct market value unless the company disposes of some of its assets or is wound up. In the case of winding-up, historically in India, fixed assets are sold at a hairdresser or value less than the market value, “said Punit Patni, an equities analyst.
“In short, this type of data is only relevant for companies that own assets that are market value or it is easy to ascertain market value, such as banks, NBFC,” he said.
What are the other variables to monitor?
Companies that have fixed assets more than market value do not necessarily mean that these companies are undervalued. Investors should use other metrics to evaluate companies before making a buying or selling decision, experts suggest.
“While it is positive for all companies to have more assets where assets have the potential to generate revenue, it is also important to look at the company’s debt,” said Rohit Khatri, AVP-Basic Research,
Broking Ltd, said.
“The appropriate approach would be to look at the book value of the company, which is assets less liabilities that give a true picture of the company’s financial position,” he said.
Khatri added that the initial assessment indicates that most of these companies are engaged in capital-intensive transactions that would require higher fixed assets.
Patni from Swastika Investmart Ltd recommends that investors understand fundamentals, management quality, competitive landscape, cash flow, return ratios such as profitability, profitability, profitability, etc., and debt and indebtedness ratios.
What should investors do?
Investors should analyze the various variables identified above to make a purchase or sale decision. Most stocks may remain in concentration mode but some of them like Tata Steel,
HPCL and Birla Corp could be a long-term game.
It is important to monitor how the company uses its assets using the turnover ratio of fixed assets. The expansion rate means that the company can generate more income without changes in fixed assets, experts point out.
“A standard checklist of industry growth prospects, company fundamentals and valuation is important to monitor before investing. Within the aforementioned shares, most of them belong to highly volatile sectors and have witnessed a good correction due to growth or margin concerns, “said Khatri at Religare Broking Ltd.
“Therefore, while we are constructive about some of the names like Tata Steel, BPCL, HPCL and Birla Corp, it is not possible to rule out underperformance in the near future,” he said.
(Disclaimer: Advice, suggestions, opinions and opinions given by experts are their own. This does not represent the views of the Economic Times)
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