The company will be evaluated considering a group of 5 peer companies according to the market classifications. Dabur shares relative valuation will be done using our 5-10-5 -star rating methodology (5 companies, 10 parameters, Out of 5 stars). From this, we will arrive at a combined peer rating for the company. Companies considered in this analysis are as follows.
- Dabur India
- Godrej Consumer
- Jyothy Labs
About the Company:
Dabur India Ltd is a market leader in Ayurveda and natural healthcare and amongst the top 4 FMCG companies in India. The company was established in 1884 and has a market presence of 13+ decades. Dabur operates some well-known brands like Dabur Honey, Dabur Chyawanprash, Real Fruit Juice, Honitus, Pudin Hara, Hajmola, Vatica, Red Paste etc which has a high top of the mind recall amongst its consumers.
The company operates in the FMCG sector and market dominance in such an industry is obtained through Scale, Branding and Distribution reach. The scale of the business is such that the company has 250+ well-known brands and a market reach to 100+ countries in the world. Dabur Honey, Chyawanprash, Odomos, Odonil, Fem and Gulabari are No.1 brands in their respective category. Dabur Glucose-D, Lal Tail, Amla, Vatica and Anmol are No.2 brands in their category and Dabur red paste, Meswak and Babool are No.3 toothpaste brands in India.
Read More Here: Dabur Fundamental Analysis and Future Outlook
Get the Excel Dashboard used for this analysis from below:
1. Market Capitalization (★ ★ ★ ★ ★)
Market capitalization is calculated by multiplying the total number of a company’s outstanding shares by the current market price of one share. Out of the 5 peer companies, Dabur has the highest market capitalization followed by Godrej Consumer, Marico, Emami and Jyothy Labs. This shows the highest Enterprise Value amongst the peers. Therefore this category gets 5 stars in Dabur shares relative valuation.
2. Price/Earnings Ratio (★ ☆ ☆ ☆ ☆)
The price-earnings ratio is the ratio of a company’s share price to the company’s earnings per share. The ratio is used for valuing companies and to find out whether they are overvalued or undervalued. P/E higher than Industry average means Overvalued and Lower than Industry average means Undervalued. Dabur shares have the highest P/E and its way above industry average, so its shares are overvalued. Therefore this category gets 1 star in Dabur shares relative valuation.
3. Price/Book Value Ratio (★ ★ ☆ ☆ ☆)
The price-to-book ratio is a financial ratio used to compare a company’s current market price to its book value. Lower than average P/B shows undervalued and higher P/B shows overvalued. Dabur shares have the second highest P/B amongst the competitors. Therefore this category gets 2 star in Dabur shares relative valuation.
4.Dividend Yield (★ ☆ ☆ ☆ ☆)
The dividend yield of a share is the dividend per share, divided by the price per share. This shows how much dividend the company pays out. Dividend yield above-average line is considered good and vice versa. Dabur has the lowest dividend yield amongst its competitors. Therefore this category gets 1 star in Dabur shares relative valuation.
5.Price/Sales Ratio (★ ☆ ☆ ☆ ☆)
The price-to-sales ratio calculated by taking a company’s market capitalization (the number of outstanding shares multiplied by the share price) and divide it by the company’s total sales or revenue over the past 12 months. The lower the P/S ratio, the more attractive the investment. Dabur has the highest P/S ratio amongst the competitors which makes its shares highly overvalued. Therefore this category gets 1 star in Dabur shares relative valuation.
6.ROCE (★ ★ ★ ★ ☆)
ROCE is a financial ratio that determines a company’s profitability and the efficiency of capital use. A higher ROCE implies a more economical use of capital and above-average ROCE is considered a good investment. Dabur has the second-highest ROCE amongst its competitors and it is also above the average line. Therefore this category gets 4 stars in Dabur shares relative valuation.
7. Return on Assets (★ ★ ★ ★ ☆)
The return on assets shows the percentage of how profitable a company’s assets are in generating revenue. Higher the ROA better is the asset utilization by the company and higher the efficiency. Dabur has the second-highest ROA amongst its competitors and it is also above the average line. Therefore this category gets 4 stars in Dabur shares relative valuation.
8. Price/ FCF Ratio (★ ☆ ☆ ☆ ☆)
This is calculated by dividing market capitalization by free cash flow of the company. A lower value for price to free cash flow indicates that the company is undervalued and its stock is relatively cheap. Dabur has the highest Price/FCF ratio amongst its peers and its way above the Industry average line. This shows that Dabur shares are highly overvalued. Therefore this category gets 1 star in Dabur shares relative valuation.
9. Earnings Per Share (★ ★ ★ ☆ ☆)
Earnings per share (EPS) is a company’s net profit divided by the number of common shares it has outstanding. EPS indicates how much money a company makes for each share of its stock, and is a widely used metric to estimate corporate value. Higher the EPS higher is profitability. Dabur is in the 3rd position with EPS also lower than the industry average. Therefore this category gets 3 stars in Dabur shares relative valuation.
10.Return on Equity (★ ★ ★ ★ ☆)
Return on equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders’ equity. ROE is considered a measure of how effectively management is using a company’s assets to create profits. Dabur has the 2nd highest ROE amongst the Peers and its also above the industry average. Therefore this category gets 4 stars in Dabur shares relative valuation.
The overall rating is arrived by taking the average of the above 10 parameter ratings and rounded up if it is above 0.5 and rounded down if it is below 0.5. The stock is undervalued if the rating is above 3 (i.e 4 or 5 stars), it is fairly valued if the rating is around 3 and is overvalued if the rating is below 3 (i.e 2 or 1 star). The ratings are exclusive to each company so more than one company can have the same ratings within the peer group.
Overall Relative Rating:
DABUR SHARES (2.6/5)
This means the stock is Slightly Over-Valued at the current price levels.
★ ★ ★ ☆ ☆
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|Relative Valuation Summary|
|Market Capitalization||★ ★ ★ ★ ★|
|Price/ Earnings Ratio||★ ☆ ☆ ☆ ☆|
|Price/ Book Value Ratio||★ ★ ☆ ☆ ☆|
|Dividend Yield||★ ☆ ☆ ☆ ☆|
|Price to Sales||★ ☆ ☆ ☆ ☆|
|ROCE||★ ★ ★ ★ ☆|
|ROA||★ ★ ★ ★ ☆|
|Price/ Cashflow||★ ☆ ☆ ☆ ☆|
|Earnings Per Share||★ ★ ★ ☆ ☆|
|ROE||★ ★ ★ ★ ☆|
|Overall Peer Rating||★ ★ ★ ☆ ☆|
(Note: All the research done by me is only for educational purposes and should not be seen as Investment recommendations. I am a Research analyst and not a SEBI registered Investment Advisor. My research completely reflects my personal opinions and not of my employers. Kindly do your own due diligence before Investing)