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The price-earnings (P/E) ratio of Samata Leather Complex Ltd is hitting the highest level among listed companies on the Dhaka Stock Exchange (DSE) in June 2019, meaning the stock is overpriced.
The tannery sector company’s P/E ratio, which is a valuation of its current market price divided by the earnings per share (EPS), soared at 2947, indicating that the stock has become high risky for investment.
Meanwhile, the overall market P/E ratio at the end of June stood at 16. The overall market P/E ratio hit the highest level at 30.58 at the end of 2010, when the market saw a wild trend before crashing.
The PE ratio determines the time an investor needs to wait to get back the invested amount. It is an indicator for considering the extent of risks an investment might entail.
The indicator is also important to better understand what happens in the market after a large gain or decline. It is also one of the best gauges to know how expensive or cheap the overall stockmarket is at a certain moment.
As a rule of thumb, investors are normally better off buying a stock with a low P/E ratio than one with a high ratio, as they are getting more earnings for their money.
The company’s share closed at Tk 73.10 each on Thursday at the DSE. Its share traded between Tk 33 and Tk 84.90 in the last one year.
The Samata Leather, listed on the DSE in 1998, failed to declare dividend more than three years and the prime bourse send the company in “Z’ category.
The company’s EPS was Tk 0.073 for January-March 2019 as against negative Tk 0.054 for January-March 2018.
In nine months for July 2018-March 2019, its EPS was Tk 0.080 as against negative Tk 0.036 for July 2017-March 2018.
Its net operating cash flow per share (NOCFPS) was Tk 0.016 for July 2018-March 2019 as against negative Tk 0.07 for July 2017-March 2018.
The net asset value (NAV) per share was Tk 14.45 as on March 31, 2019 and Tk. 14.44 as on March 31, 2018.
The company’s paid-up capital is Tk 103.20 million and authorised capital is Tk 500 million while total number of scurrilities is 10.32 million.
The sponsor-directors own 50 per cent stake in the company, while institutions own 4.25 per cent, and the general public remaining 45.75 per cent as of June 30, 2019, the DSE data shows.
Apart from Samata Leather, among others highest P/E ratio companies on the prime bourse are: CVO Petrochemicals Refinery (614.29), Fine Foods (557.79), Monno Jute Stafflers (531.28), Gemeni Sea Food (466.55), Bangas (372.75), Sonali Aansh Industries (305.65), Bangladesh Submarine Cable Company (297.13), Renwick Janeswar (281.93) and Aziz Pipes Ltd (244.51) as of June 30, 2019, the DSE data shows.
On the other hand, ONE Bank’s P/E ratio lowest among the listed companies at 3.88 in June, indicating the stock is undervalued and lucrative for investment.