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.
