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    Seven stocks to look at from small-cap universe

    Synopsis

    It has been observed that investing in companies with improving financials and low price-earnings (P/E) ratios give good returns over medium to long term.

    ET Bureau
    ET Intelligence Group: It has been observed that investing in companies with improving financials and low price-earnings (P/E) ratios give good returns over medium to long term. ETIG has shortlisted seven such companies in the small-cap universe that have given good results in the past few quarters and are trading below P/E of seven.

    SRIKALAHASTHI PIPES
    The company is into manufacturing of steel and iron pipes, demand for which has been strong due to rapid urbanisation. The government’s thrust on infrastructure provides great potential. It has reported over 50% earnings growth in each of the last four quarters. Also, its long-term debt fell by 40% in FY16.

    KALYANI STEEL
    The Kalyani Group Company manufactures specialised steel which is used by auto ancillary, defence, tube manufacturing and smelting sectors. Despite weakness in steel prices, the company reported 36% growth in the earnings in FY16 over the previous year, driven mainly by margin expansion due to lower costs and lower interest from debt reduction. Its longterm debt dropped by 30%.

    GOKALDAS EXPORTS
    Bangalore-based clothing company which owns innerwear brand Enamor and exports garments to foreign brands was struggling with high debt and losses. However, in the last two quarters, the company surprised the street with strong numbers. It reported adjusted profit of `54 crore in the second-half of FY16 against losses in the corresponding period of the previous year. The company is expected to sustain its financial performance.
    Image article boday

    SUTLEJ TEXTILES IND
    The Birla group company derives most of its sales from selling yarn. Its sales growth in each of the last four quarters was in high double digits. Most of its capacity expansion is over, the benefit of which will be seen in the coming quarters. Cotton prices, raw material for yarn manufacturing, have started to go up, which will benefit Sutlej in the near term as it may push up yarn prices. Its profitability will depend upon how well the company can pass on the additional raw material cost to end users.

    NCL INDUSTRIES
    The South India based cement manufacturer recently announced that it is out of corporate debt restructuring (CDR) scheme. The company reported stellar numbers in the first half of FY16, while the second-half numbers were not encouraging enough. But cement prices in south are rising once again. Given that its debt concerns are over, it is worthwhile to keep an eye on the stock.

    RENAISSANCE JEWELLERY
    The Mumbai-based company must be the only jeweller after Titan to have no long-term debt on its balance sheet. Its business mainly involves designing and making low-priced products for brands like Amazon, Hallmark, JCPenney, Walmart in the overseas markets. Although, March quarter earnings growth were flattish, earnings growth for the entire fiscal was 16.3%. Capital allocation efficiency and earnings multiple of below 5 make is attractive.

    IG PETROCHEM
    The largest manufacturer of Phthalic anhydride, a chemical used to make paints, could benefit from the declining supply of the chemical over the past few months. Due to this, despite flattish earnings growth for the March quarter, the stock is up 35% in the last three months. Adjusted net profit in FY16 almost doubled.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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