P/E RATIO

Price earnings ratio indicates the amount that an investor can expect to invest in order
to receive 1 rupee of company’s earnings. It also sometimes known as price multiple or
the earning multiple. P/E ratio is used here for relative valuation of the stocks so as to
find which stock is undervalued and which is overvalued.
Now for fundamental analysis of stocks P/E ratio of all individual stocks is compared
with P/E ratio of industry which is none other than the average of P/E ratios of individual
stocks.

Table 1 P/E Ratio

Relative Valuation
Company Price Undervalued/Overvalue
name (1st June) EPS P/E d
15.6273630
Bajaj Auto 2893.25 185.14 8 Undervalued
25.7753040
Hero motocorp 3623.75 140.59 8 Undervalued
42.7025089
TVS Motor 595.7 13.95 6 Overvalued
Endurance 65.8596582
Tech. 1271.75 19.31 1 Overvalued
Maruti Suzuki 8792.15 255.62 34.3953916 Overvalued
25.6340631
M&M 901.55 35.17 2 Undervalued
Eicher Motors 29788.8 628.46 47.3996754 Overvalued
28.3458646
Ashok Leyland 150.8 5.32 6 Undervalued
7.21506289
Escorts 935 129.59 1 Undervalued
Averag 32.5505435
    e 5  
 CLASSIFICATION OF STOCKS

UNDERVALUED STOCKS

Undervalued stocks are further classified by seeing their profit and revenue. If both are
in upward trend or even either one of them is going up then that particular stock will be
selected and if both are going down then that stock will be discarded.

Table 2 Undervalued Stocks