|HUL – A good buy?|
- HUL is commanding a P/Emultiple of 50. This is highest multiple it has ever commanded. FMCG companies generally trade at high PE multiples. But a PE=50, doesn’t seem sustainable.
- With a 3 year growth rate of 4.63% in Sales & 2.02% in Profits, a P/E of 50 does seem irrational.
- If we check HUL’s PEG Ratio with Current PE=50 & G=15% (though past records stands at less than 5%), we get a PEG=3.33. And a stock having PEG>1 is considered to be overvalued.
- Another way of looking at PE=50 is that investors expect HUL to grow at 50% per year in future. And common sense says that this is insane. With a company of HUL’s size, a 50% growth rate is like Elephant running at 300kmph!! 🙂