Share prices hit highs as net profits zoom

412 stocks trading at lifetime highs

As many as 412 stocks are trading at their lifetime highs on the Bombay Stock Exchange (BSE), and for good reason. The net profits of these companies have grown at a scorching pace in the last few quarters.

As a result, their discounting -- a method used to value shares by "discounting" their stream of earnings back to present -- has improved from 12.65 times a year ago to 14 now. Of the 412 stocks that hit their lifetime highs in November, the earnings record in the trailing 12 months is available for only 266.

The net profit of these companies increased by 50 per cent in the last 12 months up to the quarter ended September 2004, on top of the 54.5 per cent rise in the net profit in the earlier 12-month period ended September 2003.

The price-earning multiple of these companies increased from an average of 10.02 in November 2002 to 12.65 a year later, and further to 14.07 now. The prices of these stocks appreciated by 62.3 per cent in the last 12 months and by a whopping 225 per cent in the last two years.

Of the 266 stocks, 93 are currently trading at price-earning multiples of less than 10. Around 129 stocks were traded at multiples of less than 10 a year ago.

Apart from the healthy growth in profit, some companies made a sharp turnaround in the last four quarters. The list includes HMT, Kennamet Widia, Mahindra Ugine, Modern Steels, Tasc Pharma, Parry Agro and Nagpur Power.

Shreyas Shipping, Asian Hotels, Arrow Coated, Indo-Asian Fusegear and CCL Products posted more than a 1,000 per cent rise in net profit in the trailing 12 months.

The net profit of 10 companies increased by between 500 per cent and 1,000 per cent, while 54 companies posted between 100 per cent and 500 per cent growth in net profits.

After reporting net losses till the quarter ended June 2003, Mahindra Ugine posted net profit in the last five quarters. For the trailing 12 months, the company posted a net profit of Rs 27.02 crore against a net loss of Rs 13.77 crore in the previous year.

The stock is now trading at Rs 71.80 on the BSE, discounting its trailing 12-month earnings by 8.22 times.