HDFC Stock Price Analysis and Quick Research Report
Is HDFC an attractive stock to invest in?
Housing finance companies is a highly concentrated business-facing fierce competition and the industry has remained competitive for several years. The growth of the economy and also increase in the per capita income of individuals impact the housing industry as a whole.
These companies provide finance for housing in India to individuals and corporations. The housing finance companies majorly cater to low and middle-income individuals. The proportion of loans coming from housing companies is significantly increasing.
Around 2% of India's total population invests in financial assets. The penetration of the mutual fund industry in India is close to 7% (Based on the number of PAN cardholders). This under penetration of the mutual fund industry offers a huge opportunity for the industry to grow. Migration to financial savings, wider distribution and sustainable performance are expected to enable growth in the industry. Also, increasing financial literacy among investors, digitization and the number of mediums available tend to attract more investors to invest in the financial markets.
To understand the functions of the HDFC better, you must go through the following points:
Key Financials –
Profitability: Profit margin (PAT margin) of the company shows how well a company controls its cost. It is one of the important indicators to show the financial health of the company. Net profit of the company is Rs 96320 Cr and the compounded growth of profit in the past 3 years is 10.7377014352518 %. The PAT margin of HDFC is 22.2212123085611 %.
EPS growth: Investors should ensure the EPS figure is growing faster than revenue numbers because it indicates company management is increasing the efficiency with which it runs the company. In HDFC , the EPS declined by -14.43 % YOY.
Financial Ratios –
Return on Equity (ROE): The Company has a average ROE track record. The ROE of HDFC is at 13.7083373151599 % for the latest year.
P/E Ratio: Relative valuation metrics like the P/E ratio can be used to see if the stock of HDFC is worth at the current levels at Rs 1596.25. The stock is trading at a current P/E ratio of 35.16 and the average historical P/E for the last 5 years was 30.844.
P/B ratio can be one of the best metrics to value such companies. Currently, HDFC is trading at a P/B of 4.44102230196384 . The average historical P/B for the last 5 years was 5.406. This can be compared with the Market price per share in order to know if the stock is undervalued or overvalued.