Five under-valued pharma stocks to buy
These are firms with strong financials and relatively reasonable valuations
With the outbreak of the Covid-19 pandemic, investors latched on to stocks from defensive sectors such as pharmaceuticals, IT and FMCG to beat market volatility. Investors in such stocks were handsomely rewarded in 2020. Take for instance, the S&P BSE Healthcare Index that surged 97 per cent from the March low until December-end 2020.
With the economy showing definite signs of revival, also testified by the December quarter company results, cyclicals stocks are set to do well. While the pharmaceutical sector may not offer another successive year of spectacular returns, one can still search good long-term bets here.
How to use DuPont analysis to understand RoE
Satya Sontanam
BL Research Bureau |
Updated on
January 23, 2021
The return on equity (RoE) is one of the key metrics to identify stocks.
A simple way of calculating it, is by dividing the net profit by shareholders’ equity. The DuPont analysis takes into consideration other key financial metrics that drive the RoE and helps investors make an informed decision. As per DuPont analysis, RoE is equal to net profit margin asset turnover financial leverage.
We considered only Nifty 200 companies (excluding BFSI) for the purpose of this analysis.
Looking at the components of the DuPont analysis alone may not be the right way to pick a company but it is a good tool for comparing companies in the same industry. The metrics considered here vary from industry to industry. Especially, cyclicals for which economic phases play an important role in financial performance and can distort the ratios. Thus, your research using DuPont analys