Last Updated on Nov 5, 2024 by Aishika Banerjee
Investors are always on the lookout for undervalued stocks. These are the stocks that are valued at a lower price than their intrinsic value. Undervalued stocks present an opportunity to invest in shares at low prices and earn profits in the future.
In this blog, we have derived the list of the top 10 most undervalued stocks in India, along with their advantages and disadvantages.
Table of Contents
Most Undervalued Stocks in India (2024)NameSub-SectorMarket Cap (Rs. in cr.)Close Price (Rs.)PE Ratio5Y Historical EPS Growth (%)5Y Avg Net Profit Margin (%)CreditAccess Grameen LtdConsumer Finance15,229.40955.0010.5332.3017.81Godawari Power and Ispat LtdIron & Steel13,189.51197.1614.1030.8715.50Can Fin Homes LtdHome Financing11,402.65856.3515.1920.4021.75ICICI Securities LtdInvestment Banking & Brokerage27,726.37853.1016.3728.2535.73Gujarat Mineral Development Corporation LtdMining – Diversified11,382.81357.9518.4422.9315.09Motilal Oswal Financial Services LtdDiversified Financials56,424.60942.6523.1152.0625.84Angel One LtdInvestment Banking & Brokerage26,026.362,886.0523.1264.7223.34Five-Star Business Finance LtdConsumer Finance20,330.74695.1024.3232.0336.22Aadhar Housing Finance LtdConsumer Finance19,403.18451.4025.8824.1623.32Aavas Financiers LtdHome Financing13,364.641,688.7027.2421.1426.37Note: To churn out a list of the 10 best undervalued stocks to buy now in India from Nifty 500, we have used four parameters on the Tickertape Stock Screener.
Stock Universe: Nifty 500PE ratio: Set low to high5Y Historical EPS Growth: Set to high5Y Average Net Profit Margin: Set to highPE Ratio is a crucial factor in determining whether a stock is underperforming currently and shall be profitable in the future. The lower the PE ratio of a stock, the higher the 5Y Avg Net Profit Margin.
5Y historical EPS growth and average net profit margin reflects the company’s overall profitability and financial health. The higher the net profit margin of a company, the better they are at maintaining pricing and cost control.
Note: The information shown here is as of 5th November 2024.
🚀 Pro Tip: Select the filter “Dividend Yield” to identify top dividend yielding stocks.
How to Invest in Undervalued Stocks with smallcase?Did you know you can invest in undervalued stocks selected by SEBI-Registered analysts? Well, that is a possibility via smallcase. Here’s a brief about what it is.
smallcases are modern investment products that help investors build low-cost, long-term & diversified portfolios with ease. A smallcase is a basket or portfolio of stocks/ETFs representing an idea – an objective, theme, or strategy. They are created and managed by SEBI-registered experts.
Among 500+ smallcases, here’s a smallcase that is focused on mid-cap and small-cap companies:
Value & Momentum smallcase by Windmill Capital
High Quality Right Price smallcase by Green Portfolio
Note: These smallcases are mentioned only for educational purposes and are not meant to be recommendatory. Investors must conduct their own research and consult a financial expert before making any investment decisions.
Disclosure for Value & MomentumDisclosure for High Quality Right PriceTop 10 Undervalued Stocks in India: An OverviewHere are the details of the top undervalued stocks in India:
CreditAccess Grameen LtdCreditAccess Grameen is a non-banking financial company engaged in the microfinance sector. The company, as of 5th November 2024, had a market capitalisation of Rs. 15,229.40 cr. and a stock price of Rs. 955.00. Over the last 5 years, the company’s revenue has grown at a yearly rate of 32.15%, higher than the industry average of 15.2%, and its market share increased from 1.03% to 2.2%. Furthermore, the company’s net income has grown at a yearly rate of 35.06%, which is also higher than the industry average of 20.97% in the same period. CreditAccess Grameen Ltd’s 5-yr average net profit margin is 17.81%, and its 5-yr historical EPS growth is 32.30%.
Godawari Power and Ispat LtdGodawari Power & Ispat Ltd, the flagship company of Raipur’s Hira Group of Industries, is an integrated steel manufacturer. The company engages in mining its own iron ore and producing iron ore pellets, sponge iron, steel billets, HB wires, and ferro alloys. Additionally, it generates power for its own use. Its production facilities are based in Siltara, Raipur. Over the last 5 years, the company’s revenue has grown at a yearly rate of 10.88%, higher than the industry average of 9.87%, and its market share increased from 0.63% to 0.71%. As of 5th November 2024, the company had a market capitalisation of Rs. 13,189.51 cr., and its share price closed at Rs. 197.16. Furthermore, the company’s 5-yr average net profit margin is 15.50%, and its 5-yr historical EPS growth is 30.87%.
Can Fin Homes LtdCan Fin Homes Ltd. (CFHL) is a prominent housing finance company approved by the National Housing Bank (NHB). It provides various loan products, including housing loans for individual homes and affordable housing, as well as composite and top-up loans. As of 5th November 2024, the company had a market capitalisation of Rs. 11,402.65 cr., and its share price closed at Rs. 856.35. Over the last 5 years, the company’s revenue has grown at a yearly rate of 15.28%, higher than the industry average of 1.6%, and its market share increased from 1.06% to 6.65%. Furthermore, the company’s 5-yr average net profit margin is 21.75%, and its 5-yr historical EPS growth is 20.40%.
ICICI Securities LtdICICI Securities offers a range of financial services including brokerage, financial product distribution and investment banking and focuses on both retail and institutional clients. As of 5th November 2024, this small-cap Investment Banking & Brokerage company has a market capitalisation of Rs. 27,726.37 cr. and a stock price of Rs. 853.10. Over the last 5 years, the company’s revenue has grown at a yearly rate of 23.95%, higher than the industry average of 11.35%, and its market share increased from 5.04% to 7.98%. Furthermore, the company has a 5-yr average net profit margin of 35.73%, and a 5-yr historical EPS growth of 28.25%.
Gujarat Mineral Development Corporation LtdGujarat Mineral Development Corporation Limited (GMDC), founded by the Government of Gujarat in May 1963, is a prominent mining and mineral processing company in India. As the largest merchant seller of lignite in the country, GMDC produces lignite, bauxite, calcined bauxite, fluorspar, and manganese ore. As of 5th November 2024, the company had a market capitalisation of Rs. 11,382.81 cr., and its share price closed at Rs. 357.95. Over the last 5 years, the company’s revenue has grown at a yearly rate of 6.17%, higher than the industry average of 6%. Furthermore, the company’s 5-yr average net profit margin is 15.09%, and its 5-yr historical EPS growth is 22.93%.
Motilal Oswal Financial Services LtdMotilal Oswal Financial Services Ltd (MOFSL) is a non-banking financial company (NBFC) registered under the Reserve Bank of India Act, 1934. As of 5th November 2024, the company had a market capitalisation of Rs. 56,424.60 cr., and its share price closed at Rs. 942.65. Over the last 5 years, the company’s revenue has grown at a yearly rate of 23.7%, higher than the industry average of 11.38%, and its market share increased from 2.56% to 5.39%. Furthermore, the company’s 5-yr average net profit margin is 25.84%, and its 5-yr historical EPS growth is 52.06%.
Angel One LtdAngel One Ltd is a small-cap and full-service retail stock brokerage company. It provides broking and advisory services, margin funding, loans against shares, and distributes financial products. The Investment Banking & Brokerage, as of 5th November 2024, had a market capitalisation of Rs. 26,026.36 cr. and a stock price of Rs. 2,886.05. Over the last 5 years, the company’s revenue has grown at a yearly rate of 40.24%, higher than the industry average of 11.35%, and its market share increased from 2.3% to 6.77%. Furthermore, the company’s 5-yr average net profit margin is 23.34%, and its 5-yr historical EPS growth is 64.72%.
Five-Star Business Finance LtdFive-Star Business Finance Ltd., established in 1984, is a prominent non-banking financial company in India that offers financial support to small businesses. With over 30 years of experience, the company serves around 10,000 small and micro-enterprises nationwide. As of 5th November 2024, the company had a market capitalisation of Rs. 20,330.74 cr., and its share price closed at Rs. 695.10. Over the last 5 years, the company’s revenue has grown at a yearly rate of 40.37%, higher than the industry average of 15.2%, and its market share increased from 0.32% to 0.93%. Furthermore, the company’s 5-yr average net profit margin is 36.22%, and its 5-yr historical EPS growth is 32.03%.
Aadhar Housing Finance LtdAadhar Housing Finance Ltd is a premier non-banking financial company (NBFC) in India, dedicated to providing comprehensive housing finance solutions to individuals and businesses. As of 5th November 2024, the company had a market capitalisation of Rs. 19,403.18 cr., and its share price closed at Rs. 451.40. Over the last 5 years, the company’s revenue has grown at a yearly rate of 15.37%, higher than the industry average of 15.2%, and its market share increased from 1.01% to 1.1%. Furthermore, the company’s 5-yr average net profit margin is 23.32%, and its 5-yr historical EPS growth is 24.16%.
Aavas Financiers LtdAavas Financiers Ltd is one of India’s leading non-banking financial companies (NBFCs), specialising in affordable housing finance. The company is dedicated to providing accessible and innovative financial solutions to individuals and families, enabling them to achieve their dream of homeownership. As of 5th November 2024, the company had a market capitalisation of Rs. 13,364.64 cr., and its share price closed at Rs. 1,688.70. Over the last 5 years, the company’s revenue has grown at a yearly rate of 23.23%, higher than the industry average of 1.6%, and its market share increased from 0.43% to 3.81%. Furthermore, the company’s 5-yr average net profit margin is 26.37%, and its 5-yr historical EPS growth is 21.14%.
What are Undervalued Stocks?Undervalued stocks are equity shares with a lower market value than their intrinsic value. There can be many reasons behind this, ranging from sector-specific to the market slowdown. The process of investing in undervalued stocks is known as value investing. This method is a key component of famed investor Warren Buffet’s investment strategy.
You can determine undervalued stocks by analysing the company’s financial statements and its fundamentals. Undervalued stocks are sometimes referred to as underperforming stocks.
Reasons Why Stocks Become UndervaluedThere are several reasons for stocks to become undervalued. A few of them are listed below:
Changes in the market: Market crashes or corrections can cause the stock price to drop. For example, to skim the market froth among mid-cap and small-cap markets, Nifty Midcap and Smallcap fell exponentially during the process.Cyclical fluctuations: Share prices are impacted by cyclical fluctuations, where the performance of certain industries’ stocks can decline during particular quarters.Bad news: Negative press and economic, political, or social changes can decrease stock prices. For example, just after Hindenburg released a report on Adani Group, all the Adani stocks felt the pressure in the market and recorded a double-digit decline.Misjudged results: When the stock performance is not similar to the predicted performance, the price can fall.Advantages of Investing in Undervalued StocksThere are certain advantages of investing undervalued stocks, such as –
Earning Potential: Fundamentally strong but undervalued stocks India possess the potential for significant value appreciation once the market acknowledges their true worth, potentially yielding substantial capital gains for investors.Purchase Low, Sell High: The core principle of value investing revolves around acquiring stocks below intrinsic value, allowing investors to secure shares at a reduced cost and potentially yielding higher returns when market pricing corrects.Dividend Returns: Even when undervalued, certain companies may continue paying dividends to shareholders, offering an income stream while waiting for the stock’s price to rise.Reduced Risk: In contrast to overvalued stocks, undervalued shares typically carry lower downside risk as they are already trading at a discount, providing investors with a safety cushion.Contrarian Investment Opportunities: Investing in the most undervalued stocks India often involves going against prevailing market sentiment, offering contrarian investors a chance to enter the market when others are selling, potentially resulting in better entry points.Portfolio Diversification: Integrating undervalued stocks into a portfolio can bolster diversification, thereby reducing overall portfolio risk, as they may not necessarily move in tandem with the broader market, providing stability during market downturns.Potential for Recovery: Undervalued stocks are often associated with companies facing temporary challenges or setbacks. As these challenges are overcome or market conditions improve, these stocks have the potential to rebound.Long-Term Investment Value: Investors with a longer time horizon can harness the compounding effect of holding undervalued stocks as they appreciate in value over an extended period.Need for Discipline and Patience: Investing in undervalued stocks necessitates discipline and patience, encouraging investors to prioritise fundamental analysis and maintain a long-term perspective—a valuable approach to wealth accumulation.Recognition of Intrinsic Value: Over time, the market typically acknowledges the intrinsic value of undervalued shares, leading to price appreciation. This recognition can set in motion a self-fulfilling prophecy as more investors become interested in the stock.Risks Associated with Investing in Undervalued StocksInvesting in undervalued stocks may seem attractive to many investors; however, it’s crucial to be aware of the potential drawbacks and risks linked to this strategy. Here are some of the primary disadvantages associated with investing in undervalued shares:
Uncertain Timing: A key drawback lies in the uncertainty surrounding the timeline for under value shares to realise their full potential. It might take an extended period, sometimes years, for the market to acknowledge their value, with no guarantees regarding when or if this will occur.Increased Volatility: Undervalued shares are often undervalued for valid reasons, which can include struggling companies or industries. This can lead to heightened price volatility, exposing investors to significant price swings and short-term losses.Limited Market Interest: Certain undervalued shares may lack investor attention, resulting in reduced liquidity. This means buying or selling even the best undervalued stocks in India, including Nifty 50 undervalued stocks, quickly can be challenging, potentially leading to unfavourable trade outcomes.Company-Specific Risks: Undervalued shares might belong to companies grappling with specific challenges, such as debt burdens, management issues, or industry difficulties. These issues can impede a company’s recovery and result in investment losses.Value Traps: It’s important to recognise that not all undervalued shares will rebound. Some may remain undervalued or decline further, becoming what’s known as “value traps” that trap investors in deteriorating investments.Opportunity Cost: While waiting for undervalued shares to appreciate, investors may miss out on other investment opportunities that offer better short-term prospects and returns.Psychological Stress: Dealing with the uncertainty and price swings associated with undervalued shares can be psychologically challenging for investors, potentially leading to stress and emotionally driven decisions.Neglecting Fundamentals: Focusing exclusively on a stock’s undervaluation may lead to overlooking other critical fundamental factors that could influence the company’s long-term prospects.Capital Loss: There’s always a risk that undervalued shares may not recover, potentially resulting in losses or even a complete loss of capital if the company faces bankruptcy.Who Should Invest in Undervalued Stocks?Investing in undervalued stocks can be an appealing strategy for a variety of investor profiles, including:
Value-Oriented Investors: Value investors make undervalued stocks a central component of their investment strategy. They believe that the market occasionally misjudges stock prices, and by identifying undervalued companies, they aim to buy low and sell high when market corrections occur.Long-Term Investors: Investors with a long-term outlook can reap the benefits of investing in undervalued stocks. They are willing to hold these stocks for an extended period, patiently waiting for the market to acknowledge their true worth.Contrarian Investors: Contrarian investors thrive on bucking prevailing market sentiment. They are often attracted to undervalued stocks when others are selling, anticipating eventual rebounds in their value.Experienced Investors: Individuals with a deep understanding of financial markets, industry trends, and specific companies may be better equipped to spot undervalued stocks. Comprehensive research and analysis play a crucial role for this group.Risk-Tolerant Investors: Investing in undervalued stocks carries a higher level of risk, as there are no guarantees of immediate market recognition. Investors comfortable with elevated risk levels may find this strategy appealing.Patient Investors: Investing in undervalued stocks demands patience, as it may take time for market adjustments to occur and for stock prices to appreciate. Patient investors who can wait for potential value realisation can benefit from this approach.Fundamental Analysts: Those who thoroughly scrutinise a company’s financials, earnings potential, and industry position can make well-informed decisions about undervalued stocks based on robust fundamental analysis.Diversified Portfolio Holders: Investors with diversified portfolios often allocate a portion of their holdings to undervalued stocks to balance risk and potentially enhance returns.How to Invest in Undervalued Stocks 2024?To invest in the undervalued stocks, follow the steps mentioned below –
Open ‘Tickertape Stock Screener’Click on ‘Add Filter’ and select PE Ratio, 5Y Avg Net Profit Margin and 5Y Historical EPS Growth filters.Set the PE ratio to low, whereas set the 5Y Avg Net Profit Margin and 5Y Historical EPS Growth filters to high.From the list of suggestions, select the stock that aligns with your investment thesis.Place an order to invest in the undervalued stock.ConclusionUndervalued stocks have a lower market value than their intrinsic value. They present an opportunity to purchase shares at a lower price from well-established companies. However, there are risks associated with investing in undervalued stocks. Hence, it is always better to consult your financial advisor before investing. To list undervalued stocks based on different factors and invest in them, you can use Tickertape Stock Screener.
Frequently Asked Questions on Undervalued Stocks1. What is an undervalued stock?An undervalued stock has its market value lower than its perceived intrinsic value. They are value stocks, and investing in undervalued shares is a part of value investing, a key component of famed investor Warren Buffet’s investment strategy.
2. How do you know if a stock is undervalued in India?To determine if a stock is undervalued, check if it trades at a lower value than its intrinsic value. For this purpose, you can use various valuation techniques available, such as the Discounted Cash Flow Method or Relative Valuation.
3. What is the PE ratio?The Price-to-Earnings ratio (PE ratio) is the ratio of the current price of a company’s share with its Earnings Per Share (EPS). It is a commonly used tool to determine if the company is over or undervalued in the market.
4. Which are the top undervalued stocks in India from small-cap companies?As of 5th November 2024, the top undervalued stocks in India from small-cap companies are listed below – – CreditAccess Grameen Ltd– Godawari Power and Ispat Ltd– Can Fin Homes Ltd– ICICI Securities Ltd– Gujarat Mineral Development Corporation Ltd
The list is sorted using Tickertape Stock Screener on 5th November 2024. It is based on high 5-yr historical EPS growth and a high 5-yr net profit margin and sorted using a low to high PE ratio for the stocks of Nifty 500.
5. Which are the most undervalued stocks in India from mid-cap companies?As of 5th November 2024, the most undervalued stocks in India from mid-cap companies are listed below – – Motilal Oswal Financial Services Ltd– AU Small Finance Bank Ltd– Godfrey Phillips India Ltd– PI Industries Ltd– 360 One Wam Ltd
The list of undervalued stocks is sorted using Tickertape Stock Screener on 5th November 2024. It is based on high 5-yr historical EPS growth and a high 5-yr net profit margin and sorted using a low to high PE ratio for the stocks of Nifty 500.
6. Which are the most undervalued large cap stocks in India?As of 5th November 2024, the most undervalued large cap stocks India are:– Bajaj Finance Ltd– Cholamandalam Investment and Finance Company Ltd– Hindustan Aeronautics Ltd
The list of undervalued stocks from large cap companies is sorted using Tickertape Stock Screener on 5th November 2024. It is based on high 5-yr historical EPS growth and a high 5-yr net profit margin and sorted using a low to high PE ratio for the stocks of Nifty 500.
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Harshit SinghContent Strategist at TickertapeHey there, I’m Harshit Singh Mahey! With eight years of experience as a Content Strategist, I’ve had the pleasure of working with a Fortune 100 company and building three successful startups from the ground up. As an investment fanatic, I’ve dabbled in early-stage startups, mutual funds, gold, stocks, smallcases, and real estate to identify which assets generate the highest ROI. At Tickertape, I’m dedicated to presenting my learning and providing insightful suggestions to help my readers make sound investment decision. Latest posts by Harshit Singh (see all)Best Short Term Stocks to Buy In India - Nov 12, 2024Highest 1-Month Returns of Nifty 50 Stocks (2024) - Nov 6, 2024Undervalued Stocks: Most Undervalued Stocks in India (2024) - Nov 5, 2024