Top Low PE Ratio Stocks to Buy in 2024– Meaning, Features & Benefits

As an investor, understanding the essential financial ratios is important for making informed decisions. One frequently utilised metric to assess a stock’s worth is the price-to-earnings (PE) ratio. The PE ratio in India serves as a popular measure for evaluating the relative value of a company’s stock by comparing its current stock price to its earnings per share (EPS). In this discussion, we will define low PE ratio stocks and outline strategies for identifying them. Let’s get started.

What is a PE Ratio? 

The PE ratio, or a price-to-earnings ratio, is a widely used valuation ratio that helps to determine the relative value of a company’s stock. While a high PE ratio may indicate that a company is more expensive relative to its earnings, it may also suggest that the company has strong growth potential. Therefore, comparing companies with low p/e ratio can also help you to identify undervalued opportunities within the same industry.

What are Low PE Ratio Stocks?

A low PE ratio is a valuation metric that indicates a stock’s price is low relative to its earnings. Generally, one may consider low PE ratio stocks as undervalued. Thus, identifying low PE ratio stocks is important because it can help you find undervalued companies. As these stocks with low PE ratio companies may have strong growth potential and generate higher returns in the long run. The shares with low PE ratio may also offer a margin of safety in case of adverse market conditions.

List of the Best Low PE Ratio Stocks in India 2024

Now, since we have covered the basics, it’s time to look at the best Nifty 50 low PE stocks in India 2024:

Name	Market Cap (in Crs)	Close Price (Rs.)	PE Ratio
Coal India Ltd	₹2,79,294.85	453.20	9.92
Oil and Natural Gas Corporation Ltd	₹3,56,210.61	283.15	10.05
UPL Ltd	₹34,982.07	9.80	466.05
State Bank of India	₹6,52,344.51	11.72	730.95
Hindalco Industries Ltd	₹1,18,799.27	11.77	531.15
Indusind Bank Ltd	₹1,15,243.75	15.48	1,480.70
Power Grid Corporation of India Ltd	₹2,46,373.00	15.98	264.90
NTPC Ltd	₹3,07,529.77	18.18	317.15
Tata Steel Ltd	₹1,86,878.47	21.33	149.70
Grasim Industries Ltd	₹1,46,725.11	21.49	2,203.10

Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.

Note: The data is from 19th March, 2024.  However, for real-time updates on stock prices and market trends, visit the smallcase stocks collection today!

Brief Overview of Low PE Ratio Companies

Here is a brief overview of the top companies that have low PE ratio stocks in India 2024.

Coal India Ltd

Coal India Ltd (NSE) boasts an impressive operating revenue of Rs. 142,081.29 Cr. over the past 12 months. Notably, it exhibits outstanding annual revenue growth at 27%, a commendable pre-tax margin of 27%, and an exceptional ROE of 49%. The company maintains a healthy balance sheet with a reasonable debt-to-equity ratio of 7%, making it also one of the best PE ratio stocks India on our list!

Oil and Natural Gas Corporation Ltd

Oil & Natural Gas Corporation Ltd raked in an impressive operating revenue of Rs. 643,976.67 Cr. in the past 12 months, boasting a remarkable annual revenue growth of 28%. The pre-tax margin stands at a respectable 7%, and the return on equity (ROE) is a solid 12%. With a reasonable debt-to-equity ratio of 35%, the company maintains a robust and healthy balance sheet, making it one of the best PE ratio stocks India.

UPL Ltd

UPL Ltd generated an impressive operating revenue of Rs. 49,381.00 Cr. in the last 12 months, showcasing a remarkable annual growth of 16%. While the pre-tax margin is 9%, indicating satisfactory performance, the ROE is commendable at 13%. However, the company’s debt-to-equity ratio is on the higher side at 75%.

State Bank of India

The State Bank of India generated an impressive operating revenue of Rs. 540,660.26 Cr. in the past 12 months, showcasing an outstanding annual growth of 16%. Notably, it maintains a commendable pre-tax margin of 16% and a solid return on equity (ROE) of 16%. It is also one of the best PE ratio stocks India.

Hindalco Industries Ltd

Hindalco Industries generated a robust operating revenue of Rs. 216,168.00 Cr. in the past 12 months. The 14% annual revenue growth is commendable, supported by a pre-tax margin of 6% and a healthy ROE of 10%. However, the company’s debt-to-equity ratio stands at a relatively elevated 54%. It is one of our list’s top stocks with a low PE ratio!

Indusind Bank Ltd

Indusind Bank Ltd (NSE) generated an impressive operating revenue of Rs. 50,177.35 Cr. over the past 12 months. Noteworthy financial metrics include a remarkable annual revenue growth of 17%, a commendable pre-tax margin of 22%, and a solid return on equity (ROE) of 13%. It is also among the best PE ratio stocks in India on our list!

Power Grid Corporation of India Ltd

The Power Grid Corporation of India generated a robust operating revenue of Rs. 45,840.70 Cr. in the last 12 months. The company demonstrates solid financial performance by achieving a commendable 9% annual revenue growth, an impressive pre-tax margin of 39%, and an exceptional return on equity (ROE) of 18%. It is also one of the best PE ratio stocks India.

NTPC Ltd

NTPC Ltd generated a robust operating revenue of Rs. 176,913.20 Cr. in the last 12 months. The impressive 32% annual revenue growth, coupled with a healthy pre-tax margin of 13%, reflects the company’s financial strength. Additionally, the commendable 11% Return on Equity (ROE) contributes to the overall positive financial performance, making it one of our top stocks with low PE ratio.

Tata Steel Ltd

Tata Steel’s recent financials show an operating revenue of Rs. 235,216.69 Cr. over the past 12 months. While the annual revenue has remained stable, areas for improvement include a pre-tax margin of 7% and a return on equity (ROE) of 8%. On a positive note, the company maintains a healthy balance sheet with a reasonable debt-to-equity ratio of 50%.

Grasim Industries Ltd

Grasim Industries Ltd. is a major Indian conglomerate based in Mumbai. Founded in 1947, it began as a textile manufacturer and has since diversified into a variety of sectors, making it a leading player in the Indian market.  The company’s segments include Viscose, Chemicals, Cement, Financial Services and other businesses.

Why Invest in Low PE Stocks in India?

A lower PE ratio indicates an attractively priced stock, while a higher PE ratio suggests a relatively expensive or overvalued stock. When considering investments in low PE ratio stocks in India, it’s crucial to compare the PE ratio with those of peer companies and check the industry’s average PE ratio.

Invest in low PE stocks in India only when the company’s fundamentals are robust and the potential for future growth can be observed.

How to Calculate Low PE Ratio Shares? 

Calculating a low PE ratio involves comparing a stock’s PE ratio to the average PE ratio of the stock market or sector. Here’s how you can calculate.

• Determine the Market or Sector Average PE Ratio: Find the average PE ratio of the market or sector that the stock belongs to. The average PE ratio can be found through financial news sources or online stock screeners.
• Calculate the Stock’s PE Ratio: Divide the low stock’s current market price per share by its earning ratio per share (EPS) over the last 12 months. The formula for calculating the PE ratio is as follows:

PE Ratio = Market Price per Share / Earnings per Share

• Compare the Low PE ratio Share: A stock may be considered to have a low PE ratio if its PE ratio is lower than the industry average.

For example, if the average PE ratio of the Nifty 50 index is 25 and a stock has a current market price of Rs. 50 per share and an EPS of Rs. 5, its PE ratio would be 10 since this is lower than the average PE ratio of the Nifty 50. This means low-PE stocks in India in Nifty 50 have a low PE ratio.

Strategies For Identifying Low PE Ratio Stocks 

Here are some strategies for identifying low PE ratio stocks:

• Use Stock Screeners: Online stock screeners allow you to filter and sort low PE ratio stocks based on various metrics, including PE ratio. These screeners can be a quick and easy way to identify low PE high growth stocks.
• Analyse Company Financial Statements: You can examine a company’s financial statements, such as its balance sheet and income statement, to calculate its PE ratio. This can help you to identify low PE ratio shares or PSU stocks with low PE ratio.
• Look for Undervalued Stocks: You can use fundamental analysis and other valuation metrics to identify undervalued low PE ratio stocks.
• Consider Investing in Index Funds or ETFs: Index funds and ETFs provide access to a diversified portfolio of stocks with low price-to-earnings (PE) ratios. For instance, certain ETFs follow the Nifty Low Volatility 50 Index, which comprises 50 low-volatility stocks with modest and current PE ratios. This index includes some public sector undertaking (PSU) stocks that also have low PE ratios.

However, investors must do their own research and/or consult their financial advisor before investing.

Who Should Invest in Low PE Stocks?

Choosing a company with the lowest pe ratio shares solely based on a lower ratio may not always be the best decision. Some investors argue that purchasing a stock with a lower ratio is advantageous because you pay less for each rupee of earnings. However, it’s important to do your own research or consult a financial advisor before investing.

Features of Low PE Stocks in India

Low PE high growth stocks in the Indian market exhibit distinct characteristics that investors should be aware of for informed decision-making.

• Value Proposition: Low PE ratio stocks often represent companies trading at a lower valuation relative to their earnings. This can signify potential opportunities for value investors seeking assets priced below their intrinsic value for whom low PE high growth stocks might be attractive.

• Risk and Volatility: Low PE ratio stocks can present opportunities but may also come with higher risk and volatility. Investors should carefully assess the low PE high growth stocks’ risk tolerance and consider the potential for fluctuations in stock prices.

• Market Sentiment and Perception: Low PE ratios may reflect a company’s market sentiment and perception. Understanding the reasons behind a low PE ratio, such as temporary challenges or industry trends, is crucial for a comprehensive analysis.

• Dividend Yields: Some low PE ratio stocks may offer attractive dividend yields. Those who are looking for income-generating investments can consider the dividend history and policies of these low PE ratio stocks.
• Sector Dynamics: The characteristics of low PE ratio stocks can vary across sectors. Analysing the broader economic and industry trends is essential to contextualising the significance of a lower PE ratio of stocks within a specific industry.

Why Low PE Ratio Shares are Attractive? 

Let’s look at the various reasons that make low PE stocks in India an attractive investment option.

Potential for High Returns

Low PE stocks in India may be undervalued by the market, indicating that their current price may not represent their intrinsic worth. If the market eventually acknowledges the true value of these lower PE ratio stocks, you could potentially achieve higher returns on your investment.

Low Risk

Another advantage could be the low risk level. This is because you are paying less for each dollar of earnings generated by the company, which can provide a margin of safety if the company faces challenges or headwinds.

Attractive Valuation

Low PE ratio stocks can be an attractive valuation opportunity. Low PE stocks in India can indicate that the stock is trading at a discount relative to its peers or the broader market, making it an attractive purchase opportunity.

Favourable Market Conditions

Low PE ratio stocks can thrive during times of market volatility or economic instability. Therefore, you might opt for low PE stocks in India as a conservative approach during unpredictable times.

Diversification

Including low PE ratio stocks or trailing low PE stocks in a diversified portfolio can help spread risks and potentially enhance returns. Thus, by portfolio investing, you get a mix of high and low PE ratio stocks, balance your portfolio and potentially achieve better overall returns.

Example of Low PE Ratio Shares

Suppose two low P/E ratio stocks in India operate in the same industry with similar financials and market capitalisations. Company A has a PE ratio of 10, and Company B has a PE ratio of 20. This means that Company A’s stock price is Rs. 10 for every Rs. 1 of earnings, while Company B’s stock price is Rs. 20 for every Rs. 1.

In this scenario, Company A is said to have a low PE ratio compared to Company B. Thus, this suggests that the market is undervaluing Company A’s earnings potential, which can be an attractive buying opportunity. On the other hand, Company B may be overvalued, and you may want to exercise caution before investing in the stock.

Remember, low PE PSU stocks don’t automatically indicate an undervalued stock or a solid investment opportunity. It’s essential to thoroughly research and assess a company’s financial stability, leadership team, future growth potential, and prevailing market conditions before deciding to invest in low PE PSU stocks.

To Wrap It Up…

Stocks with low PE ratios are often considered undervalued and may offer strong returns. However, relying solely on the PE ratio for investment decisions is not advisable. It’s important to assess a company’s financial health, industry-specific PE ratios, and other fundamental indicators. Additionally, investing in low PE ratio stocks carries risks such as market fluctuations and potential losses. To mitigate these risks, consider diversifying your portfolio. At last, don’t forget to consult your financial advisor before making investment decisions.

FAQs