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Last Updated : Aug 24, 2017 09:40 AM IST | Source: Moneycontrol.com

These 10 pharma stocks’ PE trade at a discount of over 20% to 5-year average

Moneycontrol analysed pharma stocks with a market cap of over Rs 1,000 crore. In order to find out if there are any scrips available at a reasonable valuation, we used five-year average price-to-earnings as a filter

February 11, 2008: The Sensex dropped 4.57 percent within a day, as the Index shed 796.43 points. The benchmark Index fell 833 points, or 4.78 percent and closed at 16,630 on growing global worries over slowing economic expansion. The reasons cited for this fall were weak global markets and disappointing corporate earnings.
February 11, 2008: The Sensex dropped 4.57 percent within a day, as the Index shed 796.43 points. The benchmark Index fell 833 points, or 4.78 percent and closed at 16,630 on growing global worries over slowing economic expansion. The reasons cited for this fall were weak global markets and disappointing corporate earnings.
 
 
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The Indian pharma sector has been going through one of its low points of late. Even as the US regulator tightened its noose around Indian pharma companies, domestic competition and rupee appreciation in emerging markets stymied growth in the sector. The BSE healthcare index fell around 22 percent in the last one year. Since then, pharma stocks have corrected heavily and are trading at a reasonable level.

Moneycontrol analysed pharma stocks with a market cap of over Rs 1,000 crore. In order to find out if there are any scrips available at a reasonable valuation, we used five-year average price-to-earnings (PE) as a filter. Our search yielded 10 stocks which were trading at a discounted PE — over 20 percent compared to their five-year average PEs.

Exhibit2308072017536

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(Although there are various other parameters and metrics which would determine a stock's cheaper valuation, we selected our stocks on the basis of PE.)

Five stocks in the list witnessed a deep correction in their stock prices, giving a negative return of over 35 percent in the last one year.

Exhibit2308072017552

A word to the wise. While the overall market sentiment is positive right now, pharma, which used to be a safe bet, has now become a volatile sector. It has corrected much now and is available at a lower price. Investors will do well to remind themselves that the sector is going through a bad patch.

For more on some of these stocks, here are a few expert views and analysis by research firms 

 

First Published on Aug 24, 2017 09:40 am
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