Polycab 7300 CE Recommended above 270, Sl 254, Trgt 293.
UBS, Jefferies & Motilal Oswal show confidence in Polycab’s upside
The stock price of Polycab India, a leading manufacturer of electrical wires and cables, resumed their upward momentum in the last few sessions and witnessed a breakout after consolidating in a narrow range for nearly three months. The stock surged 13.14% in the last nine trading sessions, rising from ₹6,475 to ₹7,332.
Polycab shares jumped nearly 6% in Tuesday’s trade to their fresh all-time high of ₹7,353. On Monday, domestic brokerage firm JM Financial stated that the stock had been consolidating within a range of ₹6,300-6,925 in the recent sessions. Last Friday, it saw an upside breakout from this range, driven by higher-than-average traded and delivery volumes, indicating a resurgence in investor interest.
Analysis
- PE ratio: Price to Earnings ratio, which indicates how much an investor is willing to pay for a share for every rupee of earnings. A general rule of thumb is that shares trading at a low P/E are undervalued (it depends on other factors too). Polycab India has a PE ratio of 17which is high and comparatively overvalued .
- Share Price: – The current share price of Polycab India is Rs6,788.25. One can use valuation calculators of ticker to know if Polycab India share price is undervalued or overvalued.
- Return on Assets (ROA): – Return on Assets measures how effectively a company can earn a return on its investment in assets. In other words, ROA shows how efficiently a company can convert the money used to purchase assets into net income or profits. Polycab India has ROA of 87% which is a good sign for future performance. (higher values are always desirable)
- Current ratio: – The current ratio measures a company’s ability to pay its short-term liabilities with its short-term assets. A higher current ratio is desirable so that the company could be stable to unexpected bumps in business and economy. Polycab India has a Current ratio of 48.
- Return on equity: – ROE measures the ability of a firm to generate profits from its shareholders’ investments in the company. In other words, the return on equity ratio shows how much profit each rupee of common stockholders’ equity generates. Polycab India has a ROE of 16% .(higher is better)
- Debt to equity ratio: – It is a good metric to check out the capital structure along with its performance. Polycab India has a Debt to Equity ratio of 0which means that the company has low proportion of debt in its capital.
- Sales growth: – Polycab India has reported revenue growth of 74% which is fair in relation to its growth and performance.
- Operating Margin: – This will tell you about the operational efficiency of the company. The operating margin of Polycab India for the current financial year is 50%.
- Dividend Yield: – It tells us how much dividend we will receive in relation to the price of the stock. The current year dividend for Polycab India is Rs30 and the yield is 44 %.
- Earnings Per Share: – It tells us how much profit is allocated to to each outstanding share of a common stock. The latest EPS of Polycab India is Rs69 . The higher the EPS, the better it is for investors.
7300 Call Option of the stock, opened gap–down and reversed on strong buying demand. Hence, recommended above Rs.270 to grab continued momentum. Risk-reward was favorable.