
In the dynamic world of financial markets, investors grapple with various factors when assessing a stock's attractiveness. Two pivotal elements that significantly sway stock valuations, or the price of a given stock, are the quantum of growth in earnings per share (EPS) and the quality of the underlying business.
This difference in valuation can be head-scratching. Why do some stocks trade at 40, 50, or even 70 times their earnings, whereas others stay stuck at 8 to 12 times earnings?
If you can figure this out, you might be able to identify those high PE stocks that are poised for "re-rating" - an upward adjustment in their PE ratio and become multi-baggers (stocks that experience significant growth) well before the crowd catches on.
The reason? Because if everything else remains the same, a ₹ 100 stock trading at 10 times its earnings would be worth ₹ 500 if valued at 50 times its earnings. This simple PE expansion translates to a whopping 500% return.
So, how is such a dramatic increase possible? This article dives into the nuances of these factors and aims to solve the equation for achieving a better PE ratio, which can lead to significant stock price appreciation.
First and foremost, there are two important factors that help companies or stocks improve their PE ratio.
• Growth In Earnings (EPS)
• Quality Of The Business
Let us first understand the growth in earnings or EPS:
Quantum Of Growth
Let's delve deeper into the first factor that grants companies a higher PE ratio, that is, the quantum of growth in earnings per share (EPS). Understanding this growth is paramount in evaluating a stock's potential.
هذه القصة مأخوذة من طبعة April, 2024 من Beyond Market.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 9,000 مجلة وصحيفة.
بالفعل مشترك ? تسجيل الدخول
هذه القصة مأخوذة من طبعة April, 2024 من Beyond Market.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 9,000 مجلة وصحيفة.
بالفعل مشترك? تسجيل الدخول

SMART SPACES SMARTER CHOICES
FROM CUBICLES TO CO-WORKING: INDIA'S OFFICE SPACES ARE GETTING A MAKEOVER, BECOMING FLEXIBLE AND SMART

RURAL RISE URBAN SURPRISE
Rural India isn't just catching up - it's flipping the script and outpacing urban strides

TURNING WASTE INTO WEALTH
Every scrap of e-waste hides a treasure – turning yesterday's junk into today's jackpot

INDIA'S RICH GET YOUNGER, SMARTER
Tech-driven ventures and entrepreneurship are transforming under-40s into HNIs and UHNIs, reshaping India's wealth landscape

SOWING SUBSIDIES.REAPING VOTES
The DAP subsidy extension shows the government's focus on stabilizing the fertilizer sector, with increased NPK sales crucial ahead of upcoming elections

PRIVACY GETS A POMER BOOST
The draft DPDP Rules, 2025, balances individual data rights with organizational obligations, but enforcement challenges and data localization concerns may hinder their effectiveness

E-COMMERCE GETS SPEEDIER
India's quick commerce boom is set to hit ₹3.3 lakh crore by 2030, reshaping e-commerce with ultra-fast deliveries

SECTOR SPOTLIGHT
India's 2025 investment hotspots include semiconductors, quick commerce, renewables, defence, electronics, power, and water sectors

HOTELS ON A HIGH
INDIA'S HOTEL INDUSTRY IS ALL BOOKED UP FOR GROWTH - SERVING LEISURE, BUSINESS, AND WEDDINGS WITH A SIDE OF REVPAR ON THE RISE!

A BOLD NEW ERA
Reforms and expanded exploration efforts aim to tap into vast oil reserves, reducing India's import dependency while attracting global investments