Emami Shares Relative Valuation and Peer Comparison

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The company will be evaluated considering a group of 5 peer companies according to the market classifications. Emami 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.

  1. Emami
  2. Dabur India
  3. Godrej Consumer
  4. Marico
  5. Jyothy Labs



About the Company:

The company operates in the FMCG sector and market dominance in such an industry is obtained through Scale, Branding and Distribution reach. Emami has a portfolio of over 300+ products based on ayurvedic formulations. their current operations comprise more than 60+ countries including SAARC, MENAP, SEA, Africa, Eastern Europe and the CIS countries. The group strategy is for growth through both Organic and Inorganic expansion. This are driven by power brands, upcoming brand extensions and new launches, coupled with a wider international presence through acquisitions.

The company operates some well know brands like BoroPlus, Navratna, Fair and Handsome, Zandu Balm, Mentho Plus Balm, Fast Relief and Kesh King and sells around 130+ products every second. The Company also employs around 3200+ people, reaches out to 45+ lakh retails outlets through a network of over 3200 distributors and has invested in 7 plants, 4 regional offices, 1 overseas unit, 9 overseas subsidiaries, 26 distribution centres across India. 

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Read More Here: Emami Fundamental Analysis and Future Outlook

Get the Excel Dashboard used for this analysis from below:

Emami Shares Relative Valuation and Peer Comparison
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, Emami has the second-lowest market capitalization after Dabur, Godrej Consumer and Marico. This shows the company also has lower Enterprise Value amongst the peers. Therefore this category gets 2 stars in Emami shares relative valuation.



Emami Shares Relative Valuation and Peer Comparison
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. Emami shares have the second-highest P/E and its above industry average, so its shares are overvalued. Therefore this category gets 2 stars in Emami 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. Emami shares have the second-lowest P/B amongst the competitors. Therefore this category gets 4 stars in Emami shares relative valuation.



Emami Shares Relative Valuation and Peer Comparison
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. Emami has the second-lowest P/S ratio amongst the competitors which makes its shares undervalued. Therefore this category gets 4 stars in Emami shares relative valuation.

Dabur Shares Relative Valuation and Peer Comparison

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. Emami has the second-lowest ROCE amongst its competitors and it is also below the average line. Therefore this category gets 2 stars in Emami 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. Emami has the second-lowest ROA amongst its competitors and it is also above the average line. Therefore this category gets 2 stars in Emami shares relative valuation.

Emami Shares Relative Valuation and Peer Comparison
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. Emami has the second-lowest Price/FCF ratio amongst its peers and its way below the Industry average line. This shows that Emani shares are highly undervalued. Therefore this category gets 4 stars in Emami shares relative valuation.

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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. Emami is in the 4th position with EPS also lower than the industry average. Therefore this category gets 2 stars in Emami 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. Emami has the 2nd lowest ROE amongst the Peers and its also below the industry average. Therefore this category gets 2 stars in Emami 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:

EMAMI SHARES (2.7/5)

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 ★ ★ ☆ ☆
Emami Shares Relative Valuation and Peer Comparison

You can read more about the company on its website!
Investor Presentation.
For fundamental analysis of other listed companies click HERE!
For more Relative Valuation Ratings Click HERE!

Sources: Wiki, Investopedia

(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)



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