One of the effective methods for assessing whether a stock is undervalued or overvalued is by analysing key metrics such as the Price-to-Earnings (P/E) ratio and the industry P/E average.
The P/E ratio or Price-to-Earnings ratio compares the current share price to the earnings per share (EPS) of a company, serving as a widely recognised indicator for determining the value of a stock.
When a company’s P/E ratio is significantly higher than the industry average, it may indicate that the stock is overvalued, as investors are paying a premium for its earnings.
Conversely, a substantially lower P/E ratio relative to the industry average could indicate that the stock is undervalued, potentially signalling a buying opportunity.
Following are a few Public Sector Undertaking (PSU) stocks with PE less than the industry:
1. Coal India Limited
With a market cap of Rs. 2.35 lakh crores, the shares of this Maharatna company and the single largest coal producer in the world surged by nearly 0.4 percent on BSE to Rs. 393.8 on Friday.
The company experienced a marginal decline in its revenue from operations, showing a year-on-year fall of around 6.4 percent to Rs. 30,673 crores in Q2 FY25, accompanied by around 22 percent decrease in net profit to Rs. 6,275 crores, over the same period.
The stock has a P/E ratio of 6.54, compared to the industry’s P/E ratio of 19.8, indicating that the stock is trading at a lower price or in other words, the stock is undervalued.
The stock has delivered positive returns of nearly 8.8 percent in the last one year, as well as around 0.3 percent returns year-to-date.
Established in 1975, Coal India Limited (CIL) is primarily involved in the business of mining and production of coal. Its primary customers are the power and steel industries, with additional consumers in sectors such as cement, fertilizers, and brick kilns.
2. Oil and Natural Gas Corporation Limited
With a market cap of Rs. 2.98 lakh crores, the shares of the largest crude oil & natural gas company in India surged by nearly 1 percent on BSE toRs. 244.15 on Friday.
The company experienced a significant increase in its revenue from operations, showing a year-on-year rise of around 7.3 percent to Rs. 1,58,329 crores in Q2 FY25, but a decline of by around 39 percent in net profit to Rs. 9,878 crores, over the same period.
The stock has a P/E ratio of 7.16, compared to the industry’s P/E ratio of 22.1, indicating that the stock is trading at a lower price or in other words, the stock is undervalued.
The stock has delivered positive returns of nearly 17 percent in the last one year, as well as around 15.6 percent returns year-to-date.
Oil and Natural Gas Corporation Limited (ONGC) is primarily engaged in exploration, development and production of crude oil, natural gas and value-added products.
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3. Bharat Petroleum Corporation Limited
With a market cap of Rs. 1.25 lakh crores, the stock surged by nearly 1.5 percent on BSE to Rs. 299.15 on Friday.
The company experienced a marginal fall in its revenue from operations, showing a year-on-year decline of around 0.3 percent to Rs. 1,02,785 crores in Q2 FY25, accompanied by a decrease of around 72 percent in net profit to Rs. 2,297 crores, over the same period.
The stock has a P/E ratio of 9.37, compared to the industry’s P/E ratio of 20.3, indicating that the stock is trading at a lower price or in other words, the stock is undervalued.
The stock has delivered positive returns of nearly xx percent in the last one year, as well as around xx percent returns year-to-date.
Incorporated in 1952, BPCL is engaged in the business of refining of crude oil and marketing of petroleum products.
4. Power Grid Corporation of India Limited
With a market cap of Rs. 2.93 lakh crores, the shares of India’s largest electric power transmission company surged by nearly 1.2 percent on BSE to Rs. 325.5 on Friday.
The company experienced a marginal increase in its revenue from operations, showing a year-on-year rise of around 0.1 percent to Rs. 11,278 crores in Q2 FY25, accompanied by around 66.4 percent growth in net profit to Rs. 3,793 crores, over the same period.
The stock has a P/E ratio of 18.7, compared to the industry’s P/E ratio of 33.8, indicating that the stock is trading at a lower price or in other words, the stock is undervalued.
The stock has delivered positive returns of nearly 39 percent in the last one year, as well as around 33 percent returns year-to-date.
PGCIL is principally engaged in the business of implementation, operation and maintenance of Inter-State Transmission Systems (ISTS), Telecom and consultancy services.
Written by Shivani Singh
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