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 stocks with PE less than 20 to add in your watchlist:
1. Sigachi Industries Limited
With a market cap of Rs. 1,278.7 crores, the stock surged nearly 2 percent to Rs. 39.68 on Friday. The stock has a P/E ratio of 18.5, compared to the industry’s P/E ratio of 27, indicating that the stock is trading at a lower price or in other words, the stock is undervalued.
In Q3 FY25, the company’s revenue from operations grew by around 25.2 percent YoY to Rs. 139 crores, while the net profit grew by nearly 31.3 percent YoY to Rs. 21 crores.
Incorporated in 1989, Sigachi Industries Limited is engaged in the business of manufacturing Micro Crystalline Cellulose Powder (MCCP). It is a leading manufacturer of pre-formulation excipients and a leader in MCC production in India.
2. VST Industries Limited
With a market cap of Rs. 4,289.8 crores, the stock surged nearly 0.5 percent to Rs. 270.6 on Friday. The stock has a P/E ratio of 17.6, compared to the industry’s P/E ratio of 25.3, indicating that the stock is trading at a lower price or in other words, the stock is undervalued.
In Q3 FY25, the company’s revenue from operations grew marginally by around 1.1 percent YoY to Rs. 367 crores, while the net profit grew by nearly 152 percent YoY to Rs. 136 crores. VST Industries Limited is engaged in the business of manufacturing and trading of cigarettes, tobacco and tobacco products.
3. Dynacons Systems & Solutions Limited
With a market cap of Rs. 1,338 crores, the stock surged nearly 4.4 percent to Rs. 1,061.8 on Friday. The stock has a P/E ratio of 19.6, compared to the industry’s P/E ratio of 29.1, indicating that the stock is trading at a lower price or in other words, the stock is undervalued.
In Q3 FY25, the company’s revenue from operations grew by around 37 percent YoY to Rs. 311 crores, while the net profit grew by nearly 38.5 percent YoY to Rs. 18 crores.
Dynacons Systems & Solutions Ltd. is engaged in undertaking all activities related to IT infrastructure including infrastructure design and consulting services, turnkey systems integration and set up of large Network and Data Centre infrastructures.
Also read: Why is this Tata group stock the worst Nifty 50 Performer? Here’s what you need to know
4. Tejas Networks Limited
With a market cap of Rs. 12,511 crores, the stock slumped nearly 5.4 percent to Rs. 702 on Friday. The stock has a P/E ratio of 18.8, compared to the industry’s P/E ratio of 20.1, indicating that the stock is trading at a lower price or in other words, the stock is undervalued.
In Q3 FY25, the company’s revenue from operations grew by around 372 percent YoY to Rs. 2,642 crores, while the net profit grew from a loss of Rs. 45 crores in Q3 FY24 to a profit of Rs. 166 crores in Q3 FY25.
Founded in 2000, Tejas Networks Limited, a part of the Tata Group, is India’s leading indigenous developer and manufacturer of telecom and networking equipment, specialising in both wireless and wireline solutions.
The company designs, develops, and manufactures high-performance, future-ready products for building high-speed communication networks that carry voice, data and video traffic from fixed-line, mobile and broadband networks.
5. Zydus Lifesciences Limited
With a market cap of Rs. 88,166 crores, the stock slumped nearly 2.2 percent to Rs. 867.3 on Friday. The stock has a P/E ratio of 19.4, compared to the industry’s P/E ratio of 27, indicating that the stock is trading at a lower price or in other words, the stock is undervalued.
In Q3 FY25, the company’s revenue from operations grew by around 17 percent YoY to Rs. 5,269 crores, while the net profit grew by nearly 30 percent YoY to Rs. 1,026 crores.
Zydus Lifesciences Limited operates as an integrated pharmaceutical company with a product portfolio including Active Pharmaceutical Ingredients (API) and human formulations.
Written by Shivani Singh
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