Valuation Metrics Indicate Strong Undervaluation
At a price-to-earnings (PE) ratio of approximately 15.5, EPL Ltd trades significantly below many of its packaging industry peers, several of whom exhibit PE ratios well above 20 and even into the 70s and 80s. This relatively low PE suggests the market is pricing EPL Ltd conservatively compared to its earnings potential.
The company’s price-to-book (P/B) ratio stands at 2.46, which is moderate and reflects a reasonable premium over its net asset value. More importantly, the enterprise value to EBITDA (EV/EBITDA) ratio of 7.8 is notably lower than peers such as Supreme Industries and Astral, whose EV/EBITDA multiples exceed 30. This disparity highlights EPL Ltd’s comparatively attractive valuation on an operational earnings basis.
Further reinforcing the undervaluation thesis is the PEG ratio of 0.36, which is well below 1.0, indicating that EPL Ltd’s price is low relative to its earnings growth prospects. This metric is particularly compelling given the company’s robust return on capital employed (ROCE) of 16.95% and return on equity (ROE) of 15.84%, both of which demonstrate efficient capital utilisation and profitability.
Our latest monthly pick, this Large Cap from Aluminium & Aluminium Products, is outperforming the market! See the analysis that helped our Investment Committee select this winner.
- - Market-beating performance
- - Committee-backed winner
- - Aluminium & Aluminium Products standout
Peer Comparison Highlights Relative Value
When compared to its industry peers, EPL Ltd’s valuation stands out as very attractive. Competitors such as Supreme Industries, Astral, and Shaily Engineering are classified as very expensive, with PE ratios ranging from nearly 50 to over 80 and EV/EBITDA multiples exceeding 30. This stark contrast suggests that EPL Ltd offers a more reasonable entry point for investors seeking exposure to the packaging sector.
Other companies like Finolex Industries and Kingfa Science are rated as fair, while Time Technoplast and Styrenix Performance Chemicals are attractive but still trade at higher multiples than EPL Ltd. This peer context underscores EPL Ltd’s undervaluation relative to both large and mid-sized packaging companies.
Market Performance and Price Trends
Despite its attractive valuation, EPL Ltd’s stock price has underperformed the broader market and the Sensex over recent periods. Year-to-date, the stock has declined by over 22%, while the Sensex has gained more than 9%. Over the past year, EPL Ltd’s share price has fallen by more than 27%, contrasting with the Sensex’s positive return of over 5%. Even over five years, the stock’s return is negative, whereas the Sensex has nearly doubled.
These figures suggest that the market has been cautious about EPL Ltd, possibly due to sector-specific challenges or broader economic concerns. However, the company’s 10-year return of 162% remains strong, reflecting long-term value creation despite recent volatility.
Price Range and Dividend Yield
Currently trading near ₹201.65, EPL Ltd’s share price is closer to its 52-week low of ₹175.50 than its high of ₹289.70, indicating potential upside if market sentiment improves. The dividend yield of 2.48% adds an income component for investors, complementing the company’s growth prospects and enhancing total returns.
Why settle for EPL Ltd? SwitchER evaluates this Packaging Smallcap against peers, other sectors, and market caps to find you superior investment opportunities!
- - Comprehensive evaluation done
- - Superior opportunities identified
- - Smart switching enabled
Conclusion: EPL Ltd Appears Undervalued with Strong Fundamentals
Taking into account the valuation metrics, peer comparisons, and financial performance, EPL Ltd currently appears undervalued. Its low PE and EV/EBITDA multiples relative to peers, combined with a very attractive PEG ratio and solid returns on capital, suggest that the market has not fully recognised the company’s earnings potential and operational efficiency.
While recent price underperformance relative to the Sensex may reflect short-term headwinds or sector-specific concerns, the company’s long-term track record and dividend yield provide a compelling case for investors seeking value in the packaging industry. The recent upgrade in valuation grade to very attractive further supports the view that EPL Ltd offers a favourable risk-reward profile at current levels.
Investors should, however, remain mindful of broader market conditions and sector dynamics, conducting thorough due diligence before committing capital. Nonetheless, EPL Ltd’s valuation and fundamentals position it as a noteworthy candidate for inclusion in a diversified portfolio focused on quality and value.
Get 2 full years of MojoOne Premium for only Rs. 12,999. Subscribe for 1 year and we'll add another year FREE. Offer valid for a limited time. Start Saving Now →
