Which are the top low pe smallcap stocks in India right now?
As per Equitymaster's Stock Screener, here is a list of the low PE smallcap stocks in India right now...
* The PE is based on trailing 12 month earnings
Generall speaking, low PE stocks are considered to be undervalued stocks. And high PE stocks are said to be expensive.
Of course, there are other parameters, such as industry type, cyclicality, non-recurring elements etc. you should take into account before forming a hard opinion on the stock valuation.
What are smallcap stocks?
According to the market regulator, smallcap stocks are companies which rank 251st and beyond in terms of their market capitalisation.
Investing in them is perceived to be risky. However, the potential for higher returns makes them an appealing investment avenue.
What is the PE ratio?
The Price to Earnings (P/E) ratio is a valuation ratio that is used to determine whether a stock is undervalued or overvalued.
It compares the company's stock price per share divided by earnings per share.
How is the PE ratio calculated?
The PE ratio is calculated by dividing the stock price by the company's last 12 months earnings per share (EPS).
PE Ratio = Stock Price/Earnings per share
Watch this for a detailed explanation of the PE Ratio.
How much should you invest in undervalued smallcap stocks?
According to us, in a scenario of ideal allocation of funds, small cap stocks should not comprise more than 10% of one's total equity portfolio.
Further, we believe that a single small cap stock should ideally not form more than 2-3% of the total portfolio.
How should you screen smallcap stocks?
Investing in smallcap stocks can be a tall order because they are less proven, and so are rife with speculative investment due to lack of data and operation history.
If you're looking to invest in the smallcap space, this is how you should screen for the best smallcap stocks.