6 days ago
Graham Screen Identifies Three Indian Stocks Below 10x Earnings
This article uses Benjamin Graham’s rules to look for potentially undervalued Indian companies.
The companies had to be profitable, pay dividends and have relatively strong balance sheets.
Their share prices also had to be low compared with their earnings and tangible assets.
Four companies passed the first check, but Route Mobile was removed after failing the stricter asset-value test.
Three companies remained: Great Eastern Shipping, GNFC and PTC India.
Great Eastern Shipping is benefiting from strong tanker demand, although shipping earnings can change quickly.
GNFC is investing to reduce costs and increase production, but chemical prices and project delays are risks.
PTC India is expanding its power-trading activities, but its profits may be affected by lower trading margins and regulation.
The article says these stocks are only candidates for further research, not investment recommendations.
A five-test Benjamin Graham screen narrowed Indian stocks to Great Eastern Shipping, GNFC and PTC India.
The screen required low valuations, financial strength, continued profitability, dividends, earnings growth and tangible-asset support.
Route Mobile initially qualified but was removed after exceeding Graham’s 1.2-times tangible-book-value limit.
Great Eastern Shipping benefited from stronger tanker rates but remains exposed to shipping-cycle and geopolitical risks.
GNFC and PTC India offer low valuations but face execution, commodity-price, regulatory and margin pressures.
- Who
- Great Eastern Shipping Company, Gujarat Narmada Valley Fertilizers & Chemicals (GNFC), and PTC India cleared the screen; Benjamin Graham’s rules were used.
- What
- A financial screen identified three Indian stocks meeting selected Enterprising Investor value-investing criteria and trading at roughly nine times earnings or less.
- Where
- The screen covered Indian-listed companies and their businesses in shipping, chemicals and fertilizers, and power trading.
- When
- The analysis used companies that had announced Q1FY27 results and reviewed completed financial years FY22-FY26, with EPS compared between FY26 and FY21.
- Why
- The screen sought financially sound companies trading at modest valuations, while the article emphasized that the results require further research and are not recommendations.
Value Case
Risk Case
Low valuations
Value Case
The three companies met the screen’s valuation and balance-sheet requirements, with earnings multiples ranging from about 5.0 to 9.1.
Risk Case
A low valuation does not guarantee an attractive investment because earnings may weaken or business risks may be underestimated.
Business outlook
Value Case
Great Eastern Shipping is benefiting from stronger tanker rates, GNFC is pursuing cost reductions and capacity expansion, and PTC India is developing renewable, storage and cross-border power activities.
Risk Case
Shipping is cyclical, GNFC faces volatile feedstock prices and project delays, and PTC India faces lower-margin exchange volumes, regulatory dependence and uncertain subsidiary monetisation.
Earnings and dividends
Value Case
All three companies remained profitable from FY22 through FY26, reported higher FY26 EPS than FY21, and paid dividends in the latest year.
Risk Case
PTC India’s high dividend yield was boosted by a one-off payment, while quarterly performance varied: PTC India’s Q1FY27 profit fell 54% even as revenue increased.
Key facts
- Screen threshold
- Market capitalization above Rs 2,500 crore; P/E of 9 or less; price-to-book value of 1.2 or less.
- Financial tests
- Current ratio above 1.5, debt below 110% of net current assets, positive profits in FY22-FY26, a recent dividend and positive five-year EPS growth.
- Final shortlist
- Great Eastern Shipping Company, Gujarat Narmada Valley Fertilizers & Chemicals, and PTC India.
- Removed company
- Route Mobile was excluded because its tangible-book-value multiple was about 1.62, above Graham’s 1.2 limit.
- Great Eastern Shipping
- Screening valuation was about 5.05 times earnings and 1.12 times tangible book value; its Q1FY27 net profit rose 159% year on year to Rs 1,309 crore.
- GNFC
- Screening valuation was 8.18 times earnings and 0.93 times tangible book value; Q1FY27 net profit rose 275.9% year on year to Rs 312 crore.
- PTC India
- Screening valuation was about 8.96-9.1 times earnings and 0.77 times tangible book value; its trailing dividend yield was 14.8%, boosted by a one-off Rs 23-per-share dividend.
Sources
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