Alert: RIL,RPower stock valuations near 2008 levels

Dramatic market falls have at least one good fallout: stocks become cheaper for investors to buy, on a valuations basis.With the Nifty tumbling 18 percent in the past 12 months, investors will start considering various parameters to judge whether a stock is worth buying or not (although it might still be too early to take a call given the uncertain economic environment). One of those measures is the price-to-earnings (P/E) ratio. It tells us how investors value one rupee of per-share-earnings. For example, if the P/E ratio is 15, it means investors are willing to pay up to 15 times for one rupee of per-share-earnings.

[caption id=“attachment_90896” align=“alignleft” width=“380” caption=“Firstpost did a quick analysis of the Nifty-50 stocks to check stocks whose P/Es (12 months trailing) are trading close to their 2008/9 levels. Reuters”]  [/caption]

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Firstpost did a quick analysis of the Nifty-50 stocks to check stocks whose P/Es (12 months trailing) are trading close to their 2008/9 levels. While the market has fallen overall, these stocks have lost further ground due to company-specific reasons. Here is our list of stocks falling under that criterion:

•**Reliance Industries:**Its current P/E of 12 is inching towards its 2008 level of 9.95( View Chart .) The stock has fallen by 22.5 percent compared with the Nifty’s fall of around 18 percent. Earlier, the stock was quoting at a premium because of market perception of the company’s exploration and production potential. However, with no significant announcements on the E&P blocks, the stock has been a laggard.

•**BHEL:**Its current P/E is 12.75 ( **View Chart** ), even lower than what it was in 2008. Concerns about orders inflows and competition from China has resulted in a sharp fall in the company’s shares as investors fret about future earnings. Also, the government’s plan of selling its five percent stake through a follow-on public offer has not been received positively.Over the past one year, the stock has fallen by 35 percent - more sharply than the benchmark.

•**NTPC:**Its P/E touched a low of 14.3 times on 12 September ( View Chart ) and is currently trading below its 2008 levels. The company has been plagued by coal shortages, which could affect its expansion plans. The stock has fallen by 19.3 percent in the past one year.

Power Grid Corporation:The stock’s P/E touched a low of 16.2 on 12 September ( View Chart ), far below its 2008 level of around 28. Fears that problems in the generation and distribution space could spill onto the transmission arena and affect the execution of the company’s plans have resulted in a six percent fall in the stock in the past one month, compared with the Nifty, which rose 0.5 percent during the same period.

Reliance Power: The shares have fallen by a sharp 49 percent in the past one year owing to concerns about the company’s future earnings. Execution concerns on its projects ( as they are in a nascent stage) and a lack of visibility on gas allocation from its gas-based project has resulted in investors dumping this stock. The P/E fell to a low of 92.16 on 9th August 2011. View Chart