IRCTC share price halted its free-fall on Thursday — the stock hit an intraday high of Rs 4,750 within the morning commerce. However, IRCTC stock’s very high P/E ratio continues to fret investors. At a trailing P/Diluted EPS of 294x, IRCTC shares commerce near Elon Musk Tesla Inc — one other stock which has repeatedly come underneath scrutiny for high P/E multiples. IRCTC stock’s ahead P/E a number of of 147x too is near Tesla, based on S&P Capital IQ information. IRCTC’s stock price has nose-dived 29% for the reason that final hour of commerce on Tuesday after hitting a market capitalisation of Rs 1 lakh crore. Now the stock trades at Rs 4,750 with a market cap of Rs 71,700 crore.
IRCTC share valuation as high as Tesla
P/Diluted EPS Before Extra (trailing)
Forward P/E (1 year)
Source: S&P Capital IQ
Monopolistic nature pushing valuations greater
Analysts consider the run-up in IRCTC stock price and the P/E ratio has been supported by varied elements such as the opening up of tourism post-covid, platform-based business and the company’s monopolistic nature. “For IRCTC, there was the benefit in terms of opening up of the economy and the tourism industry along with the low free float in the market. The up-move in the stock started a few months back when the free float was low and this has happened earlier as well in low free float companies,” Vinod Nair, Head of Research at Geojit Financial Services instructed Financial Express Online. He added that the high P/E ratio of round 250-300 doesn’t make sense.
IRCTC’s stock price has soared 169% within the final 6 months, regardless of taking into consideration the current correction within the stock. Meanwhile, Nifty 50 has zoomed 23% throughout the identical timeframe. The PSU stock enjoys a monopoly that additional augments its valuations. “For IRCTC, the problem stems from the fact that there is no peer to get an idea of fair valuation,” Likhita Chepa, Senior Research Analyst at CapitalThrough Global Research instructed Financial Express Online.
Analysts at home brokerage agency IIFL Securities consider IRCTC has garnered curiosity after itemizing web stock Zomato that has dropped at mild the monetisation potential of the previous’s large consumer base. However, IIFL securities have downgraded the stock to Sell score seeing unfavourable danger after the present rally.
What ought to investors do?
The high P/E ratio of IRCTC has baffled analysts who consider IRCTC at its core is a beautiful business but stay cautious of the expensive nature of the stock. “The P/E ratio of 300 times does not make sense. Why should investors pay such high value for a stock, instead they should move away from this to other companies that have platform-based businesses and are making profits, Vinod Nair said. On similar lines, Likhita Chepa is advising investors to wait for valuations to cool down while adding that IRCTC. “Be it any stock, these are not the kind of valuations that investors should invest in. Investors who are currently holding the stock should avoid panic selling though as IRCTC remains a strong long-term bet,” she added.