ITC | Stock with strong fundamentals | Must have in your kitty?

fundamental analysis Jan 18, 2021

Stock analysis: ITC

This article is about ITC.
ITC has a diversified presence in FMCG, Hotels, Packaging, Paperboards & Specialty Papers and Agri-Business. ITC's aspiration to be an exemplar in sustainability practices is manifest in its status as the only company in the world, of its size and diversity, to be carbon, water and solid waste recycling positive.

Market capitalization and stock price history

ITC has a market capitalization of 2.704 trillion, at the time of making this video.
Its stock price made an all time high of rupees 342 on 03 July 2017.
market cap and stock price
In past five years, the stock price made a low of rupees 147 on 16 March 2020.
stock price variation

Stock returns

This stock gave compounded annual growth of -10 percentage over past one year, -6 percentage over past three years, and 0 percentage over past five years.
stock returns

Revenue and profits

In past 12 months, ITC had a revenue of rupees 461.1 billion, and a gross profit of rupees 283.2 billion.
As compared to previous fiscal year, in the past 12 months, it has seen a revenue decline of 5.9%.
On 31/3/2020, ITC reported a total revenue of rupees 489.8 billion, and has seen a revenue growth of 2.4% from the previous year.
The company reported an EBITDA of rupees 217.3 billion.
revenue

Fundamental analysis

Now let us look at some key financial ratios to guage how good or bad this stock is.
Its "beta" value, which is a measure of volatility of stock, is 0.65.
This means the stock moves with less volatility than the market. High-beta stocks are supposed to be riskier but provide higher return potential; low-beta stocks pose less risk but also lower returns.
Based on the last twelve months, the price to earnings ratio is 19.70.
The price to earnings ratio indicates whether the stock is undervalued or overvalued.
Based on the last twelve months, the earnings per share value is 11.15.
fundamental analysis
Now, we will compare some key financial ratios with the top 1000 NSE stocks.
For this purpose, we divide the distribution of these key indicators in to four parts or "quartiles".
Quartile region is obtained by dividing all the stocks in 4 buckets, so that each bucket contain same number of stocks.
As compared to top 1000 stocks in NSE, ITC has its beta value in the first quartile.
This means the stock exhibits very low volatility.
beta
ITC has earnings per share of 11.15, which is higher than 56% of top 1000 NSE stocks.
The earnings per share value is good.
Earnings per share is a company's net profit divided by the number of outstanding shares. This is a wildly used metric to estimate corporate value.
EPS
market cap and stock price
ITC has price to earnings ratio of 19.70, which is higher than 31% of top 1000 NSE stocks.
The price to earnings ratio is in the second quartile, this means the company stock may be undervalued.
A high price to earnings ratio may also mean that investors are expecting high growth rates in the future.
Price to earnings ratio measures its current share price relative to its per-share earnings.
price to earnings
comparison1
ITC has price to book value ratio of 4.40, which is higher than 71% of top 1000 NSE stocks.
The price to book value ratio is in the third quartile, this means the stock may be overvalued.
The price-to-book ratio compares a company's market value to its book value. Book value is net assets of the company.
This ratio should be looked at in conjunction with return on equity ratio. A low return on equity combined with high price to book ratio means stock is overvalued.
price to book ratio
comparison 2
ITC has return on equity value of 23.54%, which is higher than 82% of top 1000 NSE stocks.
The return on equity for this stock is in the fourth quartile, which is very good.
The return on equity is calculated by taking company's net earnings after taxes, subtracting preferred dividends, and dividing by the total equity.
return on equity
comparison 3
ITC has debt to equity ratio of 0.49, which is higher than 4% of top 1000 NSE stocks.
The debt to equity ratio for this stock is in the first quartile, which is very good.
A debt to equity ratio is company's total liabilities divided by shareholder's equity, and lower value of this ratio is preferred.
This ratio is a measure of the degree to which a company is financing its operations through debt versus wholly-owned funds.
A higher value of this ratio tend to indicate higher risk to the investors.
debt to equity
comparison 4
ITC has operating cash flow of 133.4 billion in the past 12 months, which is higher than 91% of top 1000 NSE stocks.
The operating cash flow for this stock is in the fourth quartile, which is very good.
operating cash flow
comparison 5
ITC has levered free cash flow of 100.5 billion in the past 12 months, which is higher than 82% of top 1000 NSE stocks.
The levered free cash flow for this stock is in the fourth quartile, which is very good.
levered free cash flow
comparison 6
ITC has payout ratio of 90.95%, which is higher than 88% of top 1000 NSE stocks.
The payout ratio of this stock is in the fourth quartile, which is very good.
The dividend payout ratio provides an indication of how much money a company is returning to shareholders versus how much it is keeping on hand to reinvest in growth, pay off debt, or add to cash reserves.
payout ratio
comparison 3

Income Statement

EBITDA
The company reported an EBITDA of rupees 217.3 billion in year 2020, which is 6% more than the EBITDA from the previous year.
The company showcased earnings per share of 12.5 in year 2020, which is 21% more than the EPS from the previous year.
EPS growth

Balance sheet

ITC has shown year on year increase in stockholder's equity by 10.4% in year 2020.
This stock showed year on year increase in stockholder's equity by 12.6% in year 2019.
This stock showed year on year increase in stockholder's equity by 13.1% in year 2018.
stockholder equity

Cash flow

ITC has free cash flow of rupees 112.6 billion in the past twelve months.
The free cash flow for the year 2020 was rupees 122.5 billion.
Cash flow

Comparison with NIFTY50

Here you can see statistics related to number of shares.
29.79% of shares are help by insiders
45.71% of shares are help by institutions
fundamental analysis
ITC is at position 15 in terms of market capitalization among the nifty 50 stocks.
market cap and stock price
ITC is at position 25 in terms of annual revenue among the nifty 50 stocks.
market cap and stock price
ITC is at position 3 in terms of free cash flow among the nifty 50 stocks.
market cap and stock price
Here, we presented a very simplified assessment of fundamental indicators. We categorized the performance on each indicator by comparing it with top 1000 NSE stocks.
On your side, go thoroughly through the financial data before deciding on investing in this stock.
market cap and stock price

Final score of our simplified assessment
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