Aurobindo Pharma Stock – Valuation & Peer Comparison

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Aurobindo Pharma Stock will be evaluated considering a group of 5 peer companies according to the market classifications. The 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. We’ll consider the below companies in this analysis:

  1. Dr. Reddy Labs
  2. Cipla
  3. Biocon
  4. Aurobindo Pharma
  5. Sun Pharma

 

About the Aurobindo Pharma Stock:

Aurobindo Pharma commenced its operations in 1988 with a single manufacturing facility for Semi-Synthetic Penicillin (SSP) in Pondicherry.

Today the company is one of the largest generic pharmaceutical players in the industry with 29+ manufacturing facilities, 155+ markets, and 26+ billion dosage forms.  

Aurobindo Pharma has a presence in key therapeutic segments such as neurosciences (CNS), cardiovascular (CVS), anti-retroviral, anti-diabetics, gastroenterology and Anti-biotics.

The company operates in the pharmaceutical business where market dominance is achieved through R&D, regulatory approvals, scale, and distribution. 

Aurobindo is the 7th largest generic company by sales in the world and the 2nd largest Indian Pharmaceutical company in terms of revenue.

It is also the 2nd largest generic Company by Rx dispensed in the US.

This shows the sheer scale of operations which the company has along with a wide distribution across the globe.

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1. Market Capitalization (★ ☆ ☆ ☆ ☆)

Aurobindo Pharma Stock Relative Valuation and Peer Comparison

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, Aurobindo Pharma has the lowest market capitalization amongst its peers. This also shows the lowest Enterprise Value amongst the peers.

Therefore this category gets 1 star in Aurobindo Pharma 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.

Aurobindo Pharma stock has the lowest P/E and its way below the industry average, so its shares are undervalued on this parameter.

Therefore this category gets 5 stars in Aurobindo Pharma stock’s relative valuation.

 

3. Price/Book Value Ratio (★ ★★ ★☆)

Aurobindo Pharma Stock Relative Valuation and Peer Comparison

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.

Aurobindo Pharma stock has the second-lowest P/B amongst the competitors.

Therefore this category gets 4 stars in Aurobindo Pharma’s 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.

Aurobindo Pharma stock has the second-lowest dividend yield amongst its competitors. Therefore this category gets 2 stars in Aurobindo Pharma relative valuation.

 

Also Watch: Aurobindo Pharma – Is it the Right Time to Enter or Exit?

 

5.Price/Sales Ratio (★ ★★★★)

Aurobindo Pharma Shares Relative Valuation and Peer Comparison

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.

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The lower the P/S ratio, the more attractive the investment.

Aurobindo Pharma stock has the lowest P/S ratio amongst the competitors which makes its shares highly undervalued on this parameter.

Therefore this category gets 5 stars in Aurobindo Pharma 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 an above-average ROCE is considered a good investment.

Aurobindo Pharma stock has the highest ROCE amongst its competitors and it is also above the average line.

Therefore this category gets 5 stars in Aurobindo Pharma shares relative valuation.

 

7. Return on Assets (★ ★ ★ ★ ★)

Aurobindo Pharma Shares Relative Valuation and Peer Comparison

The return on assets shows the percentage of how profitable a company’s assets are in generating revenue. The higher the ROA better is the asset utilization by the company and the higher the efficiency.

Aurobindo Pharma stock has the highest ROA amongst its competitors and it is also above the average line.

Therefore this category gets 5 stars in Aurobindo Pharma shares relative valuation.

 

8. Price/ FCF Ratio (★ ★ ☆☆☆)

This is calculated by dividing market capitalization by the 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.

Aurobindo Pharma stock has the lowest positive Price/FCF ratio amongst its peers and is way above the Industry average line.

This shows that Aurobindo Pharma stock is highly overvalued. Therefore this category gets 2 stars in Aurobindo Pharma 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.

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EPS indicates how much money a company makes for each share of its stock, and is a widely used metric to estimate corporate value.

The higher the EPS higher is profitability. Aurobindo Pharma stock is in the 2nd position with EPS also lower than the industry average.

Therefore this category gets 4 stars in Aurobindo Pharma shares relative valuation.

 

10.Return on Equity (★ ★ ★ ★ ★)

Aurobindo Pharma Shares Relative Valuation and Peer Comparison

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.

Aurobindo Pharma stock has the highest ROE amongst the Peers and it’s also above the industry average.

Therefore this category gets 5 stars in Aurobindo Pharma shares relative valuation.

The overall rating is arrived at 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:

AUROBINDO PHARMA STOCK (3.8/5)

This means the stock is Undervalued at the current price levels for FY 2021.

★ ★ ★

 
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 ★ ★ ★
Aurobindo Pharma Stock Relative Valuation and Peer Comparison

(Note: This research is only for educational purposes and should not be seen as Investment recommendations.)

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