P/E RATIO

Price to earnings ratio known as P/E ratio is used for valuing a company that
measures its current share price relative to its Earning per Share (EPS). This
ratio is generally computed to compare different companies of same industry or
same company with its past records. A company with a high P/E ratio usually
indicated positive future performance and investors are willing to pay more for
this company’s shares.
Formula to calculate P/E Ratio:
P/E Ratio = Market Value per Share/ Earning per Share

  2020 2019 2018 2017 2016

HUL 64.61 51.03 43.05 40.32 33.24
ITC 29.11 31.05 28.36 25.84 28.64
DABU
50 40.73 38.54 43.04 33.08
R

Chart Title
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2020 2019 2018 2017 2016

HUL ITC DABUR

INTERPRETATION:

HUL: As we can see from the chart the P/E Ratio of HUL keeps on increasing
over the years and it is the only company among my sample taken that has a
positive growth of P/E ratio. This is a favorable situation for the investors. The
P/E ratio of HUL is nearly doubled over 5 years.
ITC: The P/E ratio for ITC is rather fluctuating over the years. Like in the 2017
it declined by 3 points then for two consecutive years it rose than after this in
2020 it again declined and it is not good for a company who is trying to retain
its shareholders.
DABUR: The P/E ratio for Dabur is not so fluctuating as it has declined only
for 1 year, i.e. for 2018 and it has keeps on increasing for the rest of years. And
also its P/E ratio for 2020 is very high so investors may want to invest in this
company.

In general a higher ratio means that investors anticipate higher performance and
growth in the future.  So P/E ratio of HUL is highest followed by Dabur and
ITC so according to this ratio HUL is the company in which you should invest
your money into.
NET PROFIT MARGIN RATIO
The net profit margin ratio is calculated by dividing net income by net sales. It
shows us that how much profit is generated as a percentage of revenue. It is also
said as the best indicator of company’s financial health. Investors can look into
this ratio and see whether the company’s management is generating enough
profit from its sales that its costs and expenses are being covered.
Formula to calculate Net Profit Margin ratio:
Net Profit Margin ratio = Net Income / Net Sales

Net profit Margin %

202 201 201 201 201
 
0 9 8 7 6
15. 14. 13. 13.
HUL 14
16 07 31 8
27. 25. 26. 26. 26.
ITC
62 44 72 31 43
19. 18. 16. 14. 13.
DABUR
17 86 33 04 8

Chart Title
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15

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2020 2019 2018 2017 2016

HUL ITC DABUR

INTERPRETATION:
HUL: The NP ratio of HUL is not that great when compared to its other
competitors but it shows a positive trend over the years. It started from 13.18 in
year 2016 and now stands at 15.16% in year 2020. This is not a big gap but the
company is improving its net profit over the years.
ITC: The NP ratio of ITC is greatest when compared to its competitors but it is
fluctuating over the years like it is rising and falling in every alternate years and
investors generally refrain themselves from investing in these type of companies
but ITC has a great NP ratio in 2020 so investors will go for this company.
DABUR: Despite of not having greatest NP ratio if compared to its
competitors, ITC has a very positive growth over the years. Like it started with
13.8% in year 2016 as same as HUL but in 2020 it is 4% stronger than HUL.
This means Dabur has done great work for improving its net profit.

So as can be interpreted form the above data, the Net profit ratio of the FMCG
sector is quite good and all the companies in this sector has shown positive
growth over the years except ITC but it has the greatest Net Profit ratio in the
industry followed by Dabur.