The market offers countless opportunities for growth, and one intriguing segment to explore is stocks priced between 50 to 100 Rs. In this blog post, we will delve into the significance of discovering hidden gems within this price range, enhancing our understanding of stocks in the 50 to 100 Rs bracket.
What makes Stocks Between 50 to 100 Rs attractive?
Lower price volatility compared to higher-priced stocks: Stocks in this range often exhibit more stable price movements, reducing the risk of sudden and dramatic fluctuations. This stability provides a favorable environment for a calmer ride.
Opportunity for higher returns with smaller investments: With lower-priced stocks, even a modest investment can lead to substantial gains. Investors can leverage this advantage to build a diversified portfolio and increase their chances of earning significant returns.
Potential for growth and undervalued stocks: The 50 to 100 Rs price range often harbors hidden gems that possess immense growth potential. These stocks may be overlooked by larger investors, creating opportunities for astute individuals to identify undervalued companies poised for substantial growth.
Factors to Consider When Analysing Stocks between 50-100 Rs Range
Company fundamentals: Evaluate the company’s revenue, earnings, and profitability to gauge its financial health and stability. Thoroughly examine the company’s financial statements to ensure sustainable growth prospects.
Industry analysis: Analyze the industry landscape to identify sectors with robust growth potential. Consider market conditions, competitive dynamics, and emerging trends that can influence the company’s performance.
Management team: Assess the competence and track record of the management team. Strong leadership is essential for successfully navigating challenges and driving growth.
Valuation metrics: Utilize valuation ratios such as P/E and P/S to determine whether the stock is undervalued or overvalued relative to its peers. A careful analysis of these metrics can uncover promising investment opportunities.
Research Tools and Resources for Identifying Hidden Gems
In this blog post, we are going to use 6 metrics in order to understand whether these stocks are the players of long run or not. The metrics include:
1. Company Financials statements in the last 10 years
It provides a summary of the company’s financial activities and serves as a tool for evaluating its financial health and performance. The three primary financial statements are: Profit or Loss statement or Income statement, Balance sheet statement and Cash Flow statements.
a) Profit or Loss statement or Income statement– Within this, we will learn about the company’s revenues, expenses, and net income (or loss) over a specific period. As we know a growing Income statement over a period of time is favourable as it indicates the healthy performance of the company.
b) Cash Flow statements. It tracks the inflows and outflows of cash within a company over a specific period. It helps evaluate a company’s ability to generate cash and manage its cash flow effectively. Here, we will check that the company has a positive and growing cash flows from operating activities as it indicate that the company is generating cash from its core operations, which is generally considered a positive sign.
2. Profitability Ratios
These are financial metrics used to evaluate a company’s ability to generate profits relative to its revenue, assets, and equity. Here we will evaluate ROCE and ROE. As we know, higher is better.
3. Price to Earnings Ratio or P/E Ratio
The P/E ratio reflects the market’s perception of a company’s earnings potential and can provide insights into its relative value. A stock with a lower P/E generally indicates a good one when compared to the market average or competitors as it means that a stock is cheap and its price may rise in the future.
4. Earnings per Share or EPS
EPS indicates the amount of profit allocated to each share and is commonly used by investors to assess a company’s profitability on a per-share basis. A growing EPS over a period of time indicates consistency in earnings.
5. Debt to Equity Ratio
It is used to assess the company’s financial leverage and its reliance on debt financing compared to equity financing. In general, a lower D/E ratio is often considered favorable as it signifies a lower financial risk and indicates that the company relies less on debt financing.
6. Dividend Yield
A higher dividend yield indicates a higher return on investment through dividends, while a lower dividend yield suggests a lower return.
Also read: Wipro Fundamental Analysis: Beneath The Surface
Successful Stocks Between 50-100 Rs Range
Given these parameters, now we are ready to discuss about the stocks which compromise the topic of our today’s blog. The stocks are: Dhanalaxmi Roto Spinners Ltd, Indian Oil Corporation Ltd, IDFC First Bank Ltd, Steel Authority of India Ltd, Samvardhana Motherson International Ltd, THOMAS COOK (INDIA) LTD, NMDC LTD, National Aluminium Company Ltd, SPL Industries Ltd, GAIL (India) Ltd.
Read about: IDFC First Bank Fundamental Analysis: A Must-Read For Investors
Let’s discuss about some of the stocks.
Dhanalaxmi Roto Spinners Ltd
The company engages in the manufacture and trading of wood pulp in India. It offers fluff and wood pulp products, and paper products, such as art paper/chromo paper, base paper, binding board, bleached kraft, colored board, and etc.
Company’s Fundamentals
The company’s sales revenues have steadily increased over the 10-year period from March 2013 to March 2023, rising from 26 crores to 201 crores. This represents a substantial growth of approximately 7.73 times.
Concurrently, the company’s expenses remained consistently lower than its revenues, indicating a healthy financial position. The company experienced rising operating profits, and its net profit climbed from 1 crore to 7 crores over the span of 10 years.
There has been a consistent rise in EPS as it has increased from 1.05 Rs. per share in March 2013 to 17.05 Rs. in March 2023 indicating consistency in earnings of the company per share. The company lags behind in fulfilling the parameter of dividend payout but the Dividend Yield stands at 1.10 %.
Over the 10-year period, the company’s cash flows from operating activities experienced fluctuations. However, during the 5-year span from March 2013 to March 2023, they showed a positive and growing trend.
Debt to Equity Ratio of 0.1 is less than 1 and healthy. This implies that its assets are financed mainly through equity. Price to Earning Ratio is 5.3, lower than its sector PE ratio of 85.2. ROE stands at 20% and ROCE stands at 29%.
Downsides of the companies are: Contingent liabilities of Rs.22.6 Cr. and low EBITDA margin of 3.62% over the past 5 years.
Indian Oil Corporation Ltd
It is a holding company, which engages in refining, pipeline transportation, and marketing of petroleum products. It operates through the following business segments: Petroleum Products, Petro-Chemicals, and Other Businesses.
Company’s Fundamentals
The given table shows that the Revenue from sales of the company has gone up from 461,780 crores to 841,756 crores in a period of 10 years, that is, from March 2013 to March 2023. Company’s expenses has remained lower throughout the period.
Over the last ten years, there has been swings in the company’s operational profit. The company’s net profit also displayed inconsistent tendencies, showing the necessity for more research to understand the fundamental causes impacting profitability.
From March 2013 to March 2023, the company’s EPS demonstrated a rising trend, increasing from 3.05 rupees per share to 6.93 rupees per share. However, there was a negative EPS recorded in 2020, followed by a subsequent recovery and further growth in recent years. The company maintained a healthy dividend payout over a span of 10 years as dividend payout in March 2023 stands at 43% and the current dividend yield of the company is 8.52%.
IOC’s cash flows from operating activities have significantly risen over the 10-year period. In March 2013, it stood at 9340 crores, and by March 2023, it reached 29644 crores. This consistent increase indicates the company’s strong ability to generate cash from its core operations, reflecting its health and robustness.
Debt to Equity Ratio of 1.1 is higher than 1. This implies that company assets are financed through debt. Price to Earning Ratio is 14.1, lower than its sector PE ratio of 23.4. ROCE stands at 8.15% and ROE stands at 7.17% which are positive indicators of growth.
SPL Industries Ltd
The company engages in the manufacture and export of knitted fabric and garments. It operates through the following segments: Manufacturing and Trading of Garments. It designs, manufactures and sells outer wear, including T shirts, sweat shirts, and polo shirts for end customers in the international market.
Company’s Fundamentals
The table indicates that SPL Industries has witnessed notable growth in revenue from sales, with an increase from 40 crores in March 2013 to 285 crores in March 2023. It is noteworthy that in March 2012, the company’s expenses exceeded its revenues, but over time, expenses have been reduced, reaching 261 crores in March 2023.
In the post-COVID period, SPL Industries has experienced a significant increase in net profit, which currently stands at 24 crores in March 2023.
Furthermore, the Earnings per Share (EPS) of SPL Industries has displayed a substantial upward trend, particularly during the post-COVID period, reaching 8.2 rupees per share in March 2023. However, when it comes to the dividend payout, SPL Industries lags behind in this aspect.
Over a five-year period, the firm has seen fluctuating cash flows from operating operations. While there were some instances of rising trends, March 2022 and March 2023 saw a following decrease. The cash flows from operational operations were 14 crores in March 2023, which was a decrease from the level sustained two years earlier.
Debt to Equity Ratio of 0.1 is less than 1 and healthy. This implies that its assets are financed mainly through equity. Price to Earning Ratio is 8.2, lower than its sector PE ratio of 85.2. ROCE stands at 19.1% and ROE stands at 14.0% which are positive indicators of growth.
NMDC Ltd
It engages in the exploration of minerals. It operates through the following segments: Iron Ore, Pellets, Other Minerals & Services, and Other Reconciliation Items.
Company’s Fundamentals
The table presents a comprehensive analysis of NMDC Ltd.’s income statements over the past 10 years, covering the period from March 2013 to March 2023. During this timeframe, NMDC’s sales revenue displayed a notable increase, rising from 10704 crores to 17667 crores. However, it is important to note that the revenue declined from the previous year, as it stood at 25,882 crores in March 2022.
Similar to this, during the past ten years, NMDC’s net profit has grown, rising from 6334 crores in March 2013 to 9380 crores in March 2022. However, the net profit decreased and was only 5603 crores in March 2023.
The company demonstrates a positive and rising Earnings per Share from March 2013 to March 2023, indicating a healthy trend. In March 2013, the EPS stood at 15.98 rupees per share, and by March 2023, it had increased to 19.11 rupees per share. However, it is worth noting that there was a significant decline in EPS from March 2022, where it reached 32 rupees per share. Additionally, the company maintains a healthy dividend payout, with it standing at 35% in March 2023.
NMDC has growing and positive cash flows from operating activities in a span of 10 years indicating that the company is able to generate cash from its core business.
Debt to Equity Ratio of 0 is less than 1 and healthy. This implies that its assets are financed mainly through equity. Price to Earning Ratio is 5.6, lower than its sector PE ratio of 22.6. ROCE of the company stands at 21.1 % and ROE stands at 16.3 %.
Tips for analysing Stocks Between 50 to 100 Rs
Diversification: Spread investments across a range of stocks in different sectors to mitigate risk and maximize potential returns. A diversified portfolio provides a buffer against any individual stock’s underperformance.
Risk management strategies: Establish clear risk management strategies, including setting stop-loss orders and determining an appropriate risk tolerance level. A disciplined approach to risk management can protect investments and minimize losses.
Regular monitoring and review of portfolio: Continuously monitor the performance of your investments and review your portfolio periodically. Stay informed about company news, market conditions, and changes in the competitive landscape.
Potential Risks and Challenges
Market volatility and economic factors, Liquidity concerns with lower-priced stocks, Limited analyst coverage and information availability.
You might want to explore: Best Shares For Long-Term In India In 2023.
Conclusion
The potential for higher returns, lower price volatility, and hidden gems waiting to be discovered make this price range enticing. By considering essential factors, utilizing research tools, learning from successful case studies, and implementing effective investment strategies, one can unlock opportunities and achieve long-term success.
However, it is crucial to navigate the potential risks and challenges carefully, conducting thorough due diligence and maintaining a disciplined approach to investing.
Disclaimer
The blog is meant for informational purposes and serves the general analysis of the stocks. Contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over a period of time. The post does not consist any direct recommendation about Investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfill their personal responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.
