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"I make no attempt to forecast the market - my efforts are devoted to finding undervalued securities," said Warren Buffett
In line with Buffett's investing philosophy, we decided to find out companies that were potentially undervalued. We used our stock screener and looked for the top 10 companies trading at the highest discount to their five-year median P/E .
We applied the following filters to find these companies.
- Market cap of at least Rs 1,000 crore
- Five-year average ROCE of more than 20 per cent
- Five-year earnings growth of more than 20 per cent per annum
- Current P/E to median P/E ratio of less than one (i.e., trading below its median P/E)
49 companies showed up after applying these filters. You can access the full list here .
Next, we sorted these companies based on the largest discount to their median P/E ratio. Here are the top 10 of them.
Potentially undervalued companies
These companies are trading at a discount to their median P/E
| Company | M-cap (Rs cr) | 5Y avg ROCE (%) | 5Y EPS growth (% pa) | Current P/E |
|---|---|---|---|---|
| Religare Enterprises | 8019 | 21.23 | 29.4 | 2.5 |
| Ramky Infrastructure | 4190 | 21.5 | 101.2 | 3.4 |
| Adani Total Gas | 68463 | 27.3 | 51.1 | 122.6 |
| Route Mobile | 9864 | 25.2 | 40 | 28.1 |
| Andhra Paper | 2370 | 27.5 | 39.8 | 4.3 |
| Waaree Renewable Technologies | 2602 | 26.1 | 210.9 | 46 |
| VRL Logistics | 6237 | 22.3 | 34.2 | 17.8 |
| Fine Organic Industries | 14805 | 40.6 | 45.3 | 26.7 |
| LIC | 4,10,112 | 34.9 | 71.6 | 8.7 |
| BF Utilities | 2443 | 20.3 | 38.9 | 20.9 |
| Data as of September 28, 2023 | ||||
A word of caution
Remember that you must scrutinise the numbers further to really identify undervalued companies. For instance,
VRL Logistics
reported exceptional income in the last 12 months, and as a result, its profit is inflated, and the P/E ratio is (optically) low. So, due diligence is important so that you can discern between the visible data and the real picture.
Remember, a stock screener is not a substitute for due diligence. Also, it doesn't account for the debt of the company. So, the companies mentioned in the table are not our recommendations. Treat them as a starting point for your research.
Our stock screener serves as a first step in identifying investment opportunities using numerous filters. By applying specific criteria, like market capitalisation, ROCE, earnings growth, and P/E ratio, among many others, you can narrow down your choices, which can help you simplify your investment decision process.
Also read: Get started with your research using our stock screener
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