The company will be evaluated considering a group of 5 peer companies according to the market classifications. Jyothy Labs 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.
- Jyothy Labs
- Dabur India
- Godrej Consumer
About the Company:
Jyothy Labs Limited was founded in 1983 by Mr MP Ramachandran in Thrissur, Kerala. The company manufactures FMCG products especially in the segments of Fabric care, Dish wash, Household insecticides, Personal care etc. Recently they have also ventured into laundry services and planning to expand into few tier 1 and tier 2 cities. Jyothy Labs has a legacy to reach lakhs of households and touching millions of lives.
The company operates in the FMCG sector and market dominance in such an industry is obtained through Scale, Branding and Distribution reach. The company has 27+ manufacturing plants at 23+ locations across the country. The distribution network is also such that they have a total of 2.8+ Million retail outlets out of which 0.86+ Million is for direct distribution. The company also has 6,100+ stockists and have a daily sales volume of 3+ Million products. This shows the scale of operations for the company.
Read More Here: Jyothy Labs 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, Jyothy Labs has the lowest market capitalization after Dabur, Godrej Consumer, Marico, Emami. This shows the company has the lowest Enterprise Value amongst the peers. Therefore this category gets 1 star in Jyothy Labs 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. Jyothy Labs shares have the lowest P/E and its way below the industry average, so its shares are undervalued. Therefore this category gets 5 stars in Jyothy Labs 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. Jyothy Labs shares have the lowest P/B amongst the competitors. Therefore this category gets 5 star in Jyothy Labs 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. Jyothy Labs has the highest dividend yield amongst its competitors. Therefore this category gets 5 stars in Jyothy Labs 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. Jyothy Labs has the lowest P/S ratio amongst the competitors which makes its shares highly undervalued. Therefore this category gets 5 stars in Jyothy Labs 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. Jyothy Labs has the Lowest ROCE amongst its competitors and it is also below the average line. Therefore this category gets 1 star in Jyothy Labs 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. Jyothy Labs has the lowest ROA amongst its competitors and it is also below the average line. Therefore this category gets 1 star in Jyothy Labs 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. Jyothy Labs has the lowest Price/FCF ratio amongst its peers and its way below the Industry average line. This shows that Jyothy Labs shares are highly undervalued. Therefore this category gets 5 stars in Jyothy Labs 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. Jyothy Labs is in the last position with EPS also lower than the industry average. Therefore this category gets 1 star in Jyothy Labs 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. Jyothy Labs has the lowest ROE amongst the Peers and its also above the industry average. Therefore this category gets 1 star in Jyothy Labs 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:
JYOTHY LABS SHARES (3.0/5)
This means the stock is Fairly-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)