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Stocks to Watch Out For

Here's a list of 14 stocks that investors can add to their wish-list & buy into them when they're available at lower valuations

The markets have touched new peaks in recent weeks and at 18.5, the Sensex PE is at a two year high, which has automatically resulted in several companies also trading at their record high levels. Having arrived at the list of six stocks that won't go wrong on qualitative basis, we looked for stocks that would pass the test of times on quantitative parameters. Yes, the present times are challenging for value investors, so, we refined the idea based on fundamentals.

As a first step, we extracted only those companies which have consistently grown their revenue, operating profits and net profit in the last six years without a single year of fall. Next, to keep check on the efficiency we also checked the return on net worth and added a filter to check that this should not be more than 20 per cent in the six year period. To further ensure quality stocks, we added a clause that the growth in these companies should have come up with the backing of cash. Hence, companies with positive cash from operations were only considered. With this filter, we dropped those companies with debt to equity more than 1 to stay off overleveraged companies. Lastly, to ensure the stocks are attractive in the current market, we short-listed companies that have their price to earnings below their five year median to arrive at seven companies in all.

Company NameIndustryMarket Cap (₹cr)Revenue (₹cr)Profit (₹cr)Average RoE (%)TTM (PE)Median (PE)
Gujarat Gas CompanyIndustrial Gases3462311337129.814.116.4
Navneet EducationPrinting And Publishing133483711023.913.115
InfosysIT - Software 1,89,153477121005031.51820.4
Titan CompanyDiamond & Jewellery22621106217204131.735.7
Nestle IndiaConsumer Food4623190621117103.441.143.2
LupinPharmaceuticals4262310572172132.422.723.7
EmamiFMCG10088182638536.328.628.9

To leave you with a longer wish list, we have also listed 14 companies that passed through all the tests, but are not as attractively priced because their current PE is more than their five year average PE. Prudent investors can keep these companies on their watch-list as they can qualify to be future investment options, whenever they are available at lower valuations. Use a judicious mix of qualitative factors when investing in this list that has passed stringent quantitative filters.

Company NameIndustryMarket Cap (₹cr)Revenue (₹cr)Profit (₹cr)Average RoE (%)TTM (PE)Median (PE)
TCSIT - Software 416337766881758041.923.522.8
WiproIT - Software 14007841657718527.219.518.7
ITCTobacco28343231918843531.333.331.3
CARERatings211721712338.518.917.2
CRISILRatings8266111129846.830.626.2
Muthoot FinanceNBFC5899515181939.98.16.8
GSK ConsumerFMCG18189360450330.536.530.3
Page IndustriesTextile 75291103142484533.6
Dabur IndiaFMCG31301683588454.648.531.4
Kaveri SeedAgriculture4122104621727.419.611.7
Dhanuka AgritechPesticides13147188935.814.78.6
Zensar TechnologiesIT - Software 1727222122131.99.95.7
Godrej ConsumerFMCG2599073729075052.128.8
Gruh FinanceHousing Finance493680516629.333.718.4