After a brief correction that brought some sanity to the market, investors are back to chasing growth stocks. They are ready to pay any price for companies where growth is clearly visible.
As a result, valuations have reached stratospheric levels. Page Industries, which notched up an impressive 21% compounded annual growth in net profits in the past three years is trading at a PE of nearly 100.
Astral Poly Technik, which saw profits grow at a compounded rate of 32%, is trading at 70 times its earnings per share. If the stock is of good quality, should one look at the valuation? After all, a good quality stock will always command a hefty premium. “If you are right on the growth part, a slightly higher valuation would not do harm. For example, HDFC Bank was quoting around 25 PE in its initial years and ignoring it because it was valued higher than other banks would have been a big mistake ..
Even so, investors are paying too high a premium for quality right now. Even a good stock can be a bad investment at a very high price. You won’t make money from these stocks if you buy them at unreasonable prices. It is what experts call, Growth At Stupid Prices or GASP.
We looked at five stocks that could leave you gasping for breath. Most analysts expect them to churn out poor returns in the next 12 months.
Jamna Auto Industries Current share price 80.25 1 year TGT 112.60 Kalpataru Power Current share price 327.05 1 year tgt 506.70 KEC International Ltd Current share price 307.00 1 year tgt 411.45 CESC Ltd Current share price 988.25 1 year tgt 1167.55 Indiabulls Housing Finance Ltd Current share price 1,190.95 1 year tgt 1573.30 UPL Current share price 724.15 1 year tgt 814.60 Suprajit Engineering Ltd Current share price 243.60 1 year tgt 297.20 get intraday calls equity & derivative market click here