Quick Update for HDB Investors

HDFC Bank shares fell by -8.6% during the day's afternoon session, and are now trading at a price of $55.94. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.

An Exceptionally Low P/B ratio but Trades Above Its Graham Number:

HDFC Bank Limited provides banking and financial services to individuals and businesses in India, Bahrain, Hong Kong, and Dubai. The company belongs to the Finance sector, which has an average price to earnings (P/E) ratio of 12.38 and an average price to book (P/B) ratio of 1.58. In contrast, HDFC Bank has a trailing 12 month P/E ratio of 17.4 and a P/B ratio of 0.1.

HDFC Bank's PEG ratio is 1.67, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.

Growing Revenues With Increasing Reinvestment in the Business:

2018 2019 2020 2021 2022 2023
Revenue (MM) $7,808 $8,608 $8,942 $10,698 $11,763 $13,763
Revenue Growth n/a 10.25% 3.88% 19.64% 9.95% 17.0%
Interest Income (MM) $6,499 $7,338 $7,873 $9,348 $9,870 $11,120
Operating Margins 55% 56% 54% 56% 57% 59%
Net Margins 35% 37% 39% 42% 43% 44%
Net Income (MM) $2,742 $3,182 $3,452 $4,457 $5,088 $6,028
Earnings Per Share $1.05 $1.18 $0.62 $0.8 $0.91 $1.07
EPS Growth n/a 12.38% -47.46% 29.03% 13.75% 17.58%
Diluted Shares (MM) 5,228 5,414 5,506 5,523 5,563 5,587
Free Cash Flow (MM) $1,307 $2,414 $2,028 $12,360 $7,311 $5,275
Capital Expenditures (MM) $141 $236 $243 $244 $347 $531
Total Debt (MM) $14,328 $15,103 $13,616 $16,062 $20,487 $24,996

HDFC Bank benefits from growing revenues and increasing reinvestment in the business, low leverage, and decent net margins with a stable trend. The company's financial statements show positive EPS growth and positive cash flows.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.