52-week low stocks: Opportunities for Smart Investors

Most investors hear about great stocks only when they’ve already hit their 52-week highs and are making headlines. The media buzzes with success stories, and many rush to buy into these stocks because they’re trending, and everyone seems to be talking about them. For instance, Stock ABC soared 300% in 4 years, and XYZ delivered 260% returns in just 2 years. But rarely do we hear about these stocks at their 52-week lows—when they are still fundamentally strong and potentially offer great buying opportunities. This blog will explore stocks in India currently trading near their 52-week lows and discuss whether they present a hidden opportunity for savvy investors. Let’s dive in!

Near 52-Week Low Stocks- NSE / BSE

Near 52-Week Low Stocks in India in NSE/BSE are CSB Bank Ltd, IDFC First Bank Ltd, Easy Trip Planners Ltd, Powergrid Infrastructure Investment Trust, Spandana Sphoorty Financial Ltd, RBL Bank Ltd, Astral Ltd, Sunlite Recycling Industries Ltd, Happiest Minds Technologies Ltd, Tatva Chintan Pharma Chem Ltd. (Source: NSE India)

Let’s explore some key facts about these stocks. Scroll down to see the data table with details on each of them.

Fundamental Strengths of 52-week Low Stocks

We’ll use five key parameters to analyze these stocks:

1. Business of the Company- Understanding the core operations and market presence of the company.

2. Revenue and Profit Growth over the last 3 years. (Consistent and positive growth)

3. Return on Equity and Return on Capital Employed (ROE>15% and ROCE>15%)

4. Stock’s price-to-earnings ratio vs. industry PE to gauge valuation.

5. Debt-to-Equity (Less than 1) indicating manageable debt levels.

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CSB Bank Ltd

Business Overview– CSB Bank, formerly known as The Catholic Syrian Bank Ltd, is one of India’s oldest private sector banks with over 98 years of history. It has a strong presence in Kerala and focuses on serving SME, retail, and NRI customers. The bank’s main business segments for FY24 include Retail Banking (59%), Wholesale Banking (23%), Treasury Management (14%), and SME Banking (4%).

Revenue and Profit Growth– Over the last 3 years, CSB Bank’s revenue has consistently increased, with a 3-year CAGR of 16%. The net profit has also shown an upward trend, achieving a 3-year CAGR growth of 37%.

ROE and KPIs:

-ROE: 15.62% (Benchmark: 15%)
-NIM: 5.09% (Benchmark: 3-4%)

-Gross NPA: 1.47% (Below 2%)

Attractive Valuation

-Price-to-Earnings (P/E) Ratio: 10.21
-Sector Average P/E Ratio: 20.59
CSB Bank’s P/E ratio is significantly lower than the sector average, indicating a potentially undervalued stock.

Debt-to-Equity Ratio: With a debt-to-equity ratio of 0.48, the bank maintains a healthy financial position, indicating that its assets are primarily financed through equity rather than debt.

Also read Yes Bank Fundamental Analysis: Is It a Good Buy in 2024?

Easy Trip Planners Ltd

Business Overview– Easy Trip Planners (EMT) is India’s fastest-growing, second-largest, and only profitable online travel portal. The company provides a wide range of travel services, including flight, hotel, rail, and bus bookings. It has a network of 60,000 travel agents across India and operates through three channels: B2C, B2E, and B2B2C. Currently, over 90% of its business is B2C. EMT follows a unique pricing model with no convenience fee if no other discounts or coupons are used, resulting in a high repeat transaction rate of about 86%.

Revenue and Profit Growth– Over the last three years, Easy Trip Planners’s revenue has grown steadily, with a 3-year CAGR of 52%. Net profit has also risen consistently, with a 3-year CAGR of 40%.

ROE and ROCE:

-ROE: 17.05% (Benchmark >15%)
-ROCE: 34.06% (Benchmark > 15%)

Valuation Metrics

-Price-to-Earnings (P/E) Ratio: 65.61
-Sector Average P/E Ratio: 62.78
EMT’s P/E ratio is slightly above the sector average, indicating a higher valuation than its peers.

Debt-to-Equity Ratio: The debt-to-equity ratio of 0.02 reflects a healthy financial position, suggesting that the company primarily finances its assets through equity.

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Spandana Sphoorty Financial Ltd

Business Overview– Spandana Sphoorty Financial is a major player in microfinance, offering small, unsecured loans to low-income customers in semi-urban and rural areas. Registered with the RBI as an NBFC-MFI, it is India’s largest microfinance institution by profit and the sixth largest globally. Spandana provides various financial products, including microfinance loans, loans against property, business and personal loans, gold loans, and consumer durable loans. It operates both group-based and individual lending models, tailored to the economic needs of households.

Revenue and Profit Growth– The company achieved an impressive annual revenue growth of 71.56%, surpassing its 3-year CAGR of 18.74%. The company’s net profit soared by 3,965.45% last year, reaching ₹500.66 crore, far exceeding the sector’s average net profit growth of 25.9% for the same period. The 3-year CAGR for net profit stands at 54%.

ROE and ROCE:

-ROE: 13.73% (Benchmark >15%)
-ROCE: 20.50% (Benchmark > 15%)

Valuation Metrics
-Price-to-Earnings (P/E) Ratio: 10
-Sector Average P/E Ratio: 20.41
Spandana’s P/E ratio is lower than the sector average, indicating a relatively undervalued position.

Debt-to-Equity Ratio: With a debt-to-equity ratio of 2.59, Spandana Sphoorty relies heavily on debt to finance its assets, indicating a higher level of leverage compared to companies that use more equity. This approach can amplify returns but also involves higher risk, especially in volatile market conditions.

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RBL Bank Ltd

Business Overview– RBL Bank offers specialized services across five business verticals: Corporate Banking, Commercial Banking, Branch & Business Banking, Retail Assets, and Treasury & Financial Markets Operations. The bank has a wide network with 538 branches, 388 ATMs, and around 1,200 microfinance branches across India. It serves over 1.4 crore customers in 500 districts and 18,000 pin codes, adding over 6 lakh new customers in Q3 FY24. RBL Bank Ltd. reported a year-over-year (YoY) growth of 19.66% in advances, surpassing its 5-year CAGR of 7.68%.

Revenue and Profit Growth– The company achieved an annual revenue growth of 28.18%, exceeding its 3-year CAGR of 13.21%. Net profit increased by 37.01% over the last year, reaching ₹1,259.89 crore. The 3-year CAGR for net profit is 32%.

ROE and ROA:

-ROE: 8.49% (Benchmark >15%)
-ROA: 0.90% (Benchmark: 0.8- 1%)

Valuation Metrics
-Price-to-Earnings (P/E) Ratio: 9.98
-Sector Average P/E Ratio: 20.41
RBL Bank’s P/E ratio is lower than the sector average, suggesting it may be undervalued compared to its peers.

Debt-to-Equity Ratio: With a debt-to-equity ratio of 0.96, the bank maintains a healthy financial position, indicating that its assets are primarily financed through equity rather than debt.

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Happiest Minds Technologies Ltd

Business Overview– The company excels in providing IPs and domain expertise in key areas such as Digital Transformation & Enterprise Solutions, Product Engineering, Infrastructure Management, Security, Testing, and Consulting. It offers a range of solutions including APPrise, Digital Assisted Selling Platform (DASP), Data Accel, Digital Content Broker Solution (MCaaS), Integrated Security as a Service (iSaaS), Location Mobile Personalization (LO-MO-ME), MIDAS, and Digital Customer Onboarding (d COB™). The company has a strong client base of 244 active clients, with 57 of them being Fortune 2000 / Forbes 200 billion-dollar corporations. About 88% of its business comes from repeat clients, and roughly 53% of its clients have been with the company for over 5 years.

Revenue and Profit Growth– Over the last three years, Happiest Minds Technologies Ltd’s revenue has grown steadily, with a 3-year CAGR of 28.9%. Net profit has also risen consistently, with a 3-year CAGR of 15.2%.

ROE and ROCE:

-ROE: 16.78% (Benchmark >15%)
-ROCE: 21.59% (Benchmark > 15%)

Valuation Metrics
-Price-to-Earnings (P/E) Ratio: 50.92
-Sector Average P/E Ratio: 37.09
The company’s P/E ratio is higher than the sector average, indicating a relatively higher valuation than its peers.

Debt-to-Equity Ratio: With a debt-to-equity ratio of 0.3, the company maintains a strong financial position, showing that its assets are predominantly financed through equity.

Stocks at their near 52-Week Low

Data as of 6th September, 2024. Source: Annual Reports

Benefits and Limitations of 52-weeks Low Stocks

Benefits of 52-Week Low Stocks:

Potential for Higher Returns: Buying stocks at their 52-week low can offer significant upside potential if the company’s fundamentals remain strong and the market sentiment improves.

Value Investing Opportunity: Stocks at their 52-week lows may be undervalued, providing an opportunity to buy quality companies at a discount compared to their intrinsic value.

Diversification of Risk: Investing in stocks at their 52-week low can diversify an investment portfolio by adding potentially overlooked or contrarian picks that might outperform in different market conditions.

Limitations of 52-Week Low Stocks:

Risk of Value Traps: Not all stocks trading at their 52-week lows are bargains; some may be experiencing fundamental issues that could prevent a recovery, leading to further losses.

Market Sentiment and Volatility: Stocks at their 52-week lows are often associated with negative market sentiment, which can result in increased volatility and emotional decision-making for investors.

Uncertain Recovery Timeline: Even fundamentally strong stocks may take a long time to recover from their lows, requiring patience and a long-term investment horizon that may not align with all investors’ goals.

Disclaimer

The blog is meant for informational purposes and serves the general analysis of the stocks. The contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over some time. The post has no direct recommendations about investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfil their responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.