With the market losing heavy ground in the last few days, it has become much easier to search for value when compared to 2-weeks ago. The Sensex has now dipped almost 7% in six trading days. Several stocks have fallen through the roof. Here is a stock that could be good for its dividend yield and valuation.
But the shares of RITES
This company is a multi-disciplinary consultancy organization in the fields of transport, infrastructure and related technologies. In overseas projects, RITES actively pursues and develops cooperative links with local consultants / firms, as means of maximum utilization of local resources and as an effective instrument of sharing its expertise.
The company has seen its share price drop from levels of Rs 324 to the current levels of Rs 264.
Decent financial performance
The stock of RITES is fundamentally sound. The company is not only debt free it has significant cash on its books. If you buy the stock at the current market price, the dividend yield on the same is nearly 5%.
Apart from this based on valuations also the company's shares are attractive. For the period ending Sept 30, 2021, the company reported revenues of Rs 733.59 crores as against Rs 422.37 crores in the corresponding period of the previous quarter. Net profit for the quarter ending Sept 30, 2021 was Rs 163.13 crores, as against Rs 130 crores.
Valuations and view on the stock of RITES
Our belief is as the economy starts gaining traction, the company would be able to report better numbers. The company reported an EPS of Rs 6.79 for the quarter ending Sept 30, 2021. We believe that the company is capable of reporting much better numbers going forward. Even if it does an EPS of Rs 30 in 2022-23, the stock is trading at around 9 times 1-year forward earnings. The price to book value for the stock is also under 3 times.
Buy the stock, if you are a long-term investor. The only word of caution that we have right now is on the markets, which we believe can fall even further from current levels.
Investing in equities is risky and investors must therefore understand the risk. The author and Greynium Information Technologies Pvt Ltd would not be responsible for any losses caused based on the article. The author and is family do not hold shares in RITES. Investors should exercise caution on account of heightened volatility in the markets currently.