These 6 stocks gave at least 15% return annually during FY15-17 despite high P/E

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After reaching its all-time high of 36,443.98, Sensex has recently corrected nearly 5.5 percent on the back of weak global cues and firm bond yields.

During this period, some good companies did not witness steep correction despite having seen a surge when the index saw an upmove. This indicates that investor interest in such stocks was relatively less subdued even in a bearish sentiment.

Moneycontrol has identified some stocks where the P/E multiple did not get de-rated considerably despite the high volatility.

We studied high P/E stocks from the BSE universe with the following filters. (1.) Company's P/E should be greater than 25x annually in the last three fiscals. (2.) Return on stock should be at least 15 percent in each fiscal during the same period.

Notably, the likes of Ajanta Pharma, Berger Paints India, Eicher Motors, Hatsun Agro Products, Safari Industries, and Shree Cement fulfilled the above-mentioned criteria.

Though in general, low P/E stock with good fundamentals can be a decent indicator  for investing as it indicates that a company may currently be undervalued. But as the markets are hovering around higher levels, such stocks tend to re-rate quite a bit and can sustain such levels for a longer period of time than its peers.

Caveat: PE ratio is one of the most widely used tools for stock selection. However, one must consider other financial ratios and different combinations before picking the stocks.

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