Choosing Between Manappuram Finance Ltd. and Muthoot Finance Ltd.: A Comprehensive Guide
When it comes to making informed investment decisions, comparing financial metrics is crucial. In this article, we will delve into a detailed comparison of two prominent Non-Banking Financial Companies (NBFCs) - Manappuram Finance Ltd. and Muthoot Finance Ltd. By the end of this guide, you will have the necessary information to decide which stock to invest in, based on a variety of key performance metrics.
Stock Price and Market Valuation
The stock prices of Manappuram Finance Ltd. and Muthoot Finance Ltd. stand at Rs 134.15 and Rs 862.70 as of May 1, 2020, respectively. Considering the recent hike in the share price of Muthoot Finance, it is advisable to wait for the market to stabilize before investing. The share price of Manappuram Finance appears to be a more stable investment option given the current market conditions. (Citation: Source)
Price to Earnings Ratio (PE Ratio)
The PE ratio of Manappuram Finance Ltd. is 10.28, while Muthoot Finance Ltd.'s PE ratio is 12.81. The PE ratio is a measure of the price paid for a share relative to the company's earnings. A higher PE ratio could indicate that investors are willing to pay more per unit of earnings, which can be attractive. However, a higher PE ratio also suggests that you might be paying more for a share with less profit. Based on this metric, Manappuram Finance appears to be the more suitable option. (Source: In-depth analysisPublished by Xpress Money)
Price to Book Ratio (PB Ratio)
Manappuram Finance has a PB ratio of 2.21, while Muthoot Finance's PB ratio is 3.04. The PB ratio compares a company's market price to its book value, offering insights into whether the stock is overvalued or undervalued. A lower PB ratio suggests that the stock price is lower relative to the company's book value. Based on the lower PB ratio, Manappuram Finance is the more compelling investment. (Source: Market Watch)
Earnings Per Share (EPS)
Manappuram Finance's EPS is Rs 13.06, whereas Muthoot Finance's EPS is Rs 67.40. Despite Muthoot Finance having a higher EPS, the share price disparity must be taken into account. The EPS percent of Manappuram Finance is 9.7, and for Muthoot Finance, it is 7.8. Considering the share prices, investing in Manappuram Finance seems to offer a better return for the investor. (Source: Business World News)
Return on Equity (ROE)
Manappuram Finance's ROE is 19.40, while Muthoot Finance's ROE is 22.45, making Muthoot Finance the clear winner in this aspect. A higher ROE generally indicates that the company is more effective at generating returns for its shareholders. This metric suggests that Muthoot Finance is a more robust investment choice, albeit at a higher share price. (Source: News Today)
Economic Growth and Profit Trends
The income growth of Manappuram Finance over the last three years stands at 15.59%, whereas Muthoot Finance has experienced a growth of 12.26%. Similarly, the profit growth of Manappuram Finance is 32.84% compared to Muthoot Finance's 34.55%. While both companies have shown growth, Muthoot Finance's higher growth rates suggest a more dynamic financial performance. (Source: Zerodha)
Company Holdings and Ownership Structure
The promoter holdings in Manappuram Finance as of December 2019 are 44.29% with 2.19% pledged, whereas Muthoot Finance has a 73.44% promoter holding with no pledges. This strong ownership structure in Muthoot Finance suggests better control and possibly better decision-making dynamics, which can be a significant factor in investment decisions. (Source: Investing News)
Conclusion
After a comprehensive analysis of various financial metrics, the choice between Manappuram Finance Ltd. and Muthoot Finance Ltd. can be a complex one. While Muthoot Finance shows superior performance in certain aspects, such as ROE and profit growth, Manappuram Finance offers a more balanced and potentially lower-risk investment option. Ultimately, the decision will depend on your specific investment goals and risk tolerance.
If you are looking for a more stable investment at a potentially lower risk, Manappuram Finance might be a better choice. Conversely, if you are willing to accept a higher share price for potentially higher returns, Muthoot Finance could be the way to go.