How expensive are Nifty50 stocks: Companies with Discounted 5-Year P/E Ratios

Nifty50 touched a significant milestone yesterday, reaching 20,000 for the first time ever, and closed at 19,996 levels. Today, it opened at 20,110, which is 0.57% or 114 points higher than the previous day’s closing levels. As of writing this article, it is trading at 19,950 levels, experiencing some profit booking in the early morning trading session.

Today, we are going to observe the Nifty50 stocks that are trading at a Price-to-Earnings (P/E) ratio, either at a premium or a discount compared to their five-year P/E ratios with more focus on the stocks trading at a discount. Moreover, we will include companies whose EPS improved in the recent quarters compared to the corresponding quarter last year.

What is a P/E ratio?

It is a financial metric used by investors and analysts to assess the relative value of a company’s stock. It is one of the most used valuation ratios in the stock market and is calculated by dividing the current market price per share of a company’s stock by its earnings per share (EPS).

Here are the companies currently trading in the market at a discount compared to their five-year P/E ratios:

Out of 50 stocks, 23 are trading at a discount compared to their 5-year P/E ratios. Among these 23 stocks, only two, BPCL and Tata Motors, posted negative EPS in Q1 FY23 but improved significantly, posting positive EPS in Q1 FY24. However, only Coal India and UPL Limited saw their EPS fall in the last quarter by 10% and 81%, respectively.

Here is the list of companies currently trading at a premium compared to their 5-year P/E ratios:

After observing the data above, Tata Steel and JSW Steel are trading at a premium of 1177 times and 263 times the market EPS, respectively.

Tata Steel’s EPS has decreased, while JSW Steel’s EPS improved in the recent quarter by 92% and 179%, respectively.

Market participants always try to find stocks that are trading at a lower P/E ratio compared to their historical P/E ratios. This article might help you complement your efforts in searching for low P/E stocks in the market for your investment.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.