The company will be evaluated considering a group of 5 peer companies according to the market classifications. Jubilant Life Sciences 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.
- Divi’s Labs
- Jubilant Life Sciences
- Granules India
- Aarti Drugs
About the Company:
Jubilant Life Sciences is a flagship company of the Jubilant Bhartia Group which operates Jubilant FoodWorks and Jubilant Industries as well. The company has entered into a non-exclusive licensing agreement with Gilead Sciences Inc. that will grant it the right to manufacture and sell the drug named, Remdesivir, in 127 countries including India. The drug is said to be a potential therapy for Covid-19.
The company operates in an Industry where market dominance comes through R&D capacity, Patents, Scale and Distribution. Jubilant Life Sciences currently has 11 manufacturing facilities out of which 7 are in India, 2 in the US and 2 in Canada. The company is No.3 radiopharmaceuticals manufacturer and has No.2 commercial radiopharmacy network in the US. The company is also a No.2 player in the allergenic extract market and sole producer of venom products in the US. In the Generic’s business, the company has 55 products and is No.1 in 4 products with over 45% market share in each. In Life Science chemicals the company is globally No.4 in Acetic Anhydride and No.7 in Ethyl Acetate.
Read More Here: Jubilant Life Sciences 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, Jubilant Life Sciences has the third-highest market capitalization followed by Granules and Aarti Drugs. This shows the medium Enterprise Value amongst the peers. Therefore this category gets 3 stars in Jubilant Life Sciences 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. Jubilant Life Sciences shares have the second-lowest P/E and its way below the industry average, so its shares are undervalued. Therefore this category gets 2 stars in Jubilant Life Sciences 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. Jubilant Life Sciences shares have the lowest P/B amongst the competitors. Therefore this category gets 5 star in Jubilant Life Sciences 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. Jubilant Life Sciences has the highest dividend yield amongst its competitors. Therefore this category gets 5 stars in Jubilant Life Sciences 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. Jubilant Life Sciences has the lowest P/S ratio amongst the competitors which makes its shares highly undervalued on this parameter. Therefore this category gets 5 star in Jubilant Life Sciences 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. Jubilant Life Sciences has the second-lowest ROCE amongst its competitors and it is also below the average line. Therefore this category gets 2 stars in Jubilant Life Sciences 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. Jubilant Life Sciences has the second-lowest ROA amongst its competitors and it is also below the average line. Therefore this category gets 2 stars in Jubilant Life Sciences 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. Jubilant Life Sciences has the lowest positive Price/FCF ratio amongst its peers and its way below the Industry average line. This shows that Jubilant Life Sciences shares are highly undervalued on this parameter. Therefore this category gets 5 stars in Jubilant Life Sciences 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. Jubilant Life Sciences is in the 2nd position with EPS also higher than the industry average. Therefore this category gets 4 stars in Jubilant Life Sciences 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. Jubilant Life Sciences has the 2nd lowest ROE amongst the Peers but its also above the industry average. Therefore this category gets 2 stars in Jubilant Life Sciences 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:
JUBILANT LIFE SCIENCES SHARES (3.5/5)
This means the stock is Slightly Under-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)