Beware of These 5 High Returning but High PE Stocks

The recent rise in commodity prices and the

government's cash ban have been major setbacks
for the so-called 'growth' stocks, which enjoy high
PE multiples on account of their above-average
earnings growth comparative to the broader
market. Many of these stocks are from the Realty
household sector, which generally have stable
earnings outlook. But as earnings recovery gets
deferred for India Inc, especially on the consumer
side, analysts are advising investors to become
cautious of high PE stocks despite the recent
correction.
Below are a few stocks that have yielded high returns since budget but have high PE and
lowest institutional holdings.

Realty-Household:
PGEL: PG Electroplast Limited is a diversified Electronic Manufacturing Services and
Plastic Injection Molding company looking after the requirements of leading OEMs in
Consumer Electronics and Automotive Industry.

PGEL share price movement:

At 12:09 PM on 22nd December 2016, PGEL share price was trading at Rs. 28.50 with the
days decline of over 5 per cent.

Below is the table of movement of PGEL share price:

Fall
From
52
52
week Week
high High
budget
199.7 35.65% 149.03%

EPS
Sept
16
0.03

EPS
June
16
0.76

EPS
march
16
3.72

EPS
Dec
15
-1.92

EPS
Sept Institution
15
holding
PE
-0.81 2
52.6

DebtEquity
0.63

Highlights: Since the day of the budget on 22nd February 2016 the stock has risen 149 per
cent.

Why should you avoid?

Although the stock has gained a space
among the top 500 performance for the
quarter, the chart above shows it has
already begun its descend. Apart from the
March quarter of the year 2016, the
company's EPS data is miserable. The
institution holding is also very low in the
company and the PE is also very high at
52.6 per cent. Even though looking at the
returns the stock might look pretty
attractive, it is still advisable to stay away
from PGEL.

Uniply: This is yet another stock from the Realty-Household sector that poses a threat to the
shining portfolio. Uniply is involved in the making of Veneers, plywood, doors and boards.
At the time Uniply share price was trading at Rs. 209.30, dipping by 2.63 per cent intraday.

fall
from
52
52
week week
high high
budget
321.9 35.09% 149.95%

EPS
Sept
16
0.75

EPS
June
16
0.86

EPS
march
16
0.45

EPS
Dec
15
0.49

EPS
Sept Institution
Debt15
holding
PE
Equity
0.47 4
95.13 1.47

Highlights: Uniply has gained almost 150 per cent since the budget day when market made a
low and the chart below reflects it is still going good. Also, the company has a Debt-Equity
less than 2.

Why should you avoid?

Even though the company has given out a
stable EPS every quarter on the standalone
basis yet the figures aren't impressive at
all. The company has only 4 institutional
holding and has the PE of 95. The
company also has 51.82 per cent promoters
holding pledged. The stock might look
attractive at the price and the kind of yields
it has been giving yet it has not got the
strong fundamentals that can back it up
and keep it in the list of top 500
performing stock for the quarter as it has
been identified by Dynamic Levels
currently.

Financial Services:
Aalankit: Alankit Group is a conglomerate of 9 Group companies with diversified activities
into Financial Services, e-Governance, Insurance and Health Care verticals. The company
has recently gone through the share-split.
Currently Alankit share price is trading at Rs. 33.30 being one among the few stocks who
were trading in green in an otherwise red market.
fall
52
from
wee 52
k
week
high high
60.35
85
%

budget
100.00
%

EPS
sept
16

EPS
june
16

EPS
marc
h 16

EPS
Dec
15

EPS
Sept
15

Institution
al holding

0.46

0.53

0.54

0.18

0.18

PE
77.4
8

DebtEquit
y
0

Highlights: The stock has doubled the returns since 22nd February 2016.

Why should you avoid?

Even though the stock is still trading
strong and looks very tempting owing to
its yield Alankit has high PE ratio of
77.48. The company's EPS aren't very
attractive as well. Precisely that is why
even after being in the top 500
performing list of stocks one should avoid
getting hands on it.

HOV Services: HOV Services Limited ("HOVS") runs as a hybrid between investment and
diversified services corporation. HOVS has grown over the last ten years through series of
key acquisitions. The Company believes that this operational structure is essential to their
value proposition for their future success.
At the time, HOV Services share price was trading at Rs. 109 slipping by approximately 2
per cent.

52
week
high
131.8
0

fall
from
52
week
high
16.92
%

EPS
Sept
budget 16
69.73
%
0.21

EPS
June
16

EPS
marc
h 16

EPS
Dec
15

EPS
Sept
15

Institution
al holding

0.22

0.45

0.18

0.01

PE
91.6
8

DebtEquit
y
0.04

Highlights: HOV Services has gained almost 70 per cent since the budget day when market
made a low andit is still going good. Also, the company has a Debt-Equity less than 2.

Why should you avoid?

The company has the very high PE and
their EPS has not been any impressive as
well. Also, there is just one institutional
holding in the company. It is an indication
that one should not be tempted by its
attractive valuation and must avoid it
even when it is the top 500 performing
stock for the quarter.

Infra-Power:
Energy Development: The Company concurrently generates clean, green electricity from
water and wind in its own power plants as well as develops energy and infrastructure projects
for other developers. The company at present has 19 MW of renewable energy capacity and
has 291 MW of hydroelectric projects at various stages of development. The Company has
goals to develop and own around 500 MW of new Hydro Electric Power Projects at an
estimated capital outlay of Rs.7000-8000 crores in the next 5-7 years.
As of now, Energy Development share price is trading at Rs. 58.05, just 0.26 per cent lower
than its previous close.

fall
52
from
wee 52
k
week
high high
76.59
248 %

budget
520.13
%

EPS
Sept
16

EPS
June
16

EPS
marc
h 16

EPS
Dec
15

EPS
Sept
15

Institution
al holding

0.69

-0.65

0.61

-0.55

1.33

PE
916.4
1

DebtEquit
y
0

Highlights: The stock has grown stunningly since budget hitting 520 per cent gain.

Why should you avoid?

The chart above shows that the stock has
already beginning to decline. The
company has ridiculously high PE ratio
with not so attractive EPS payouts in
every quarter. Also, the institutional
holdings are just 3. This makes the stock
risky, even more than the returns it has
been offering of late. It has been among
the top 500 performing stock for the
quarter.

Conclusion:
These high PE stocks might look very attractive at the current valuation as they have been
yielding high returns. Yet it is not advisable to put them in your investment portfolio. They
are just too risky and not worth the losses they can befall.

Disclaimer
The investment advice or guidance provided by way of recommendations, reports or other ways are solely the personal views of the research
team. Users are advised to use the data for the purpose of information and rely on their own judgment while making investment decision.
Dynamic Equities Pvt. Ltd - SEBI Investment Advisory Reg. No.: INA300002022

Disclosure
Dynamic Equities Pvt. Ltd. is a member of NSE, BSE, MCX SX and a DP with NSDL & CDSL. It is also engaged in Investment Advisory
Services and Portfolio Management Services. Dynamic Commodities Pvt. Ltd., associate company, is a member of MCX & NCDEX. We declare
that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered. SEBI,
Exchanges and Depositories have conducted the routine inspection and based on their observations have issued advise letters or levied minor
penalty on for certain operational deviations.
Answers to the Best of our knowledge and belief of Dynamic/ its Associates/ Research Analyst: DYNAMIC/its Associates/ Research Analyst/
his Relative:

Do not have any financial interest / any actual/beneficial ownership in the subject company.
Do not have any other material conflict of interest at the time of publication of the research report
Have not received any compensation from the subject company in the past twelve months
Have not managed or co-managed public offering of securities for the subject company.
Have not received any compensation for brokerage services or any products / services or any compensation or other benefits from the
subject company, nor engaged in market making activity for the subject company
Have not served as an officer, director or employee of the subject company

Article Written by
Tanaya Nath