While many market participants felt a sense of FOMO about missing out on a stock like MRF Ltd when its share price crossed the coveted Rs 1 lakh mark on Tuesday, analysts said the six-digit record doesn’t make it the most expensive stock.
MRF is one of those few stocks that never went for a stock split or bonus issue, unlike most blue-chip stocks. For the year ending March 2023 MRF has declared an equity dividend of 1,500% amounting to Rs 150 per share considering the face value of Rs 10. At the current share price of Rs 1 lakh this results in a dividend yield of 0.15%.
If one considers the Rs 42,000-crore market capitalisation of MRF, it won't even figure among the top 100 listed companies of India. Reliance leads this coveted group with an m-cap of Rs 16.8 lakh crore, followed by TCS at Rs 11.8 lakh crore, HDFC Bank at nearly Rs 9 lakh crore.
Sonam Srivastava, founder at Wright Research, an investment advisory firm said "it's crucial to research and evaluate a company's underlying value and future prospects before investing" and not just look at its share price. Srivastava said there are multiple factors to look at and not just get swayed by a share price.
"A stock's price tag doesn't indicate whether it's cheap or expensive. The value of a stock depends on several factors like market capitalisation, price-to-earnings (P/E) ratio, earnings, and growth prospects. Market capitalization considers a company's total value by multiplying its stock price by outstanding shares. The P/E ratio compares a company's share price to its per-share earnings, indicating its expected growth or lack thereof.
"A stock with a high price may be justified by strong earnings and future growth prospects. Conversely, penny stocks, despite their low price, can be "expensive" due to their high risk. They're often less established, prone to price manipulation, and have large bid-ask spreads, making them costly to trade. Therefore, it's crucial to research and evaluate a company's underlying value and future prospects before investing," said Srivastava.
Gaurav Bissa, VP, InCred Equities, said there's more steam left in the MRF stock
"MRF has witnessed a strong upside in the last few months with continued outperformance against broader market indices. The stock is currently forming bullish flag pattern on the weekly charts which is a continuation pattern in nature. The stock had earlier given a breakout retest from a triangle pattern Rs 95,000 levels followed by some consolidation. A close above Rs 1 lakh will confirm bullish flag breakout, which can push it towards Rs 1.15 lakh levels. The stock is showing equally interesting setup on point and figure charts. The stock has seen follow through of bullish abc pattern breakout on 0.25x3 daily time frame. The cluster target comes around Rs 1.15 lakh on point and figure charts, which coincides with the bullish flag and triangle pattern targets," said Bissa.
Other costly stocks
Data shows that there are at least 15 other stocks that are trading above Rs 10,000 in the domestic equity market. The list includes players such as Honeywell Automation India and Page Industries. Shares of Honeywell Automation India ended trade 0.92 per cent higher at Rs 41,399 on Tuesday. On the other hand, Page Industries ended trade 0.79 per cent higher at Rs 38,450.
At present, shares of 3M India, Shree Cement, Nestle India and Abbott India also trade above the Rs 20,000-mark.
Bosch, Procter & Gamble Hygiene and Health Care, Lakshmi Machine Works, Kama Holdings, Polson, Tasty Bite Eatables, The Yamuna Syndicate, ZF Commercial Vehicle Control Systems India and Bombay Oxygen Investments are the other stocks that traded between Rs 10,000 and Rs 20,000 on June 13.