For investors navigating the stock market, a thorough analysis of financial data is paramount to accurately gauge a company’s intrinsic value. Traditionally, this involves a deep dive into a company’s profit and loss statements, balance sheets, and cash flow statements. This process, while comprehensive, can be time-consuming and complex, often overwhelming even seasoned investors.
A more streamlined approach to assessing a company’s financial health and investment potential lies in examining key financial ratios. These ratios offer a condensed yet insightful perspective on a company’s performance, making the vast amounts of data in financial statements more digestible and actionable for informed decision-making.
Currently, the Celebrity Fashions Limited Share Price stands at Rs 12.63. To determine whether Celebrity Fashions represents an attractive investment opportunity at this price, let’s delve into some crucial financial ratios every investor should consider. This analysis will provide a clearer picture of how to evaluate Celebrity Fashions’ stock from a financial standpoint.
Price to Earnings (PE) Ratio: The PE ratio is a fundamental metric that reveals how much investors are willing to pay for each rupee of a company’s earnings. Generally, a low PE ratio can suggest that a stock is undervalued, although this interpretation should be considered alongside other financial indicators. Celebrity Fashions currently has a PE ratio of -4.1599420308949, which, being negative, indicates that the company is not currently profitable. A negative PE ratio can be a sign of financial distress, requiring further investigation into the company’s earnings and future prospects before considering investment.
Share Price: As mentioned, the current share price of Celebrity Fashions is Rs 12.63. To ascertain whether this share price accurately reflects the company’s intrinsic value, investors can utilize valuation calculators available on various financial platforms. These tools can help determine if Celebrity Fashions’ share price is currently undervalued or overvalued based on different valuation models and financial metrics.
Return on Assets (ROA): Return on Assets (ROA) is a key profitability ratio that measures how effectively a company generates profit from its assets. In essence, ROA demonstrates how efficiently a company converts its investments in assets into net income or profits. Celebrity Fashions exhibits an ROA of 1.1376%. This relatively low ROA suggests that the company is not generating significant profit from its asset base, which could be interpreted as a negative indicator for future financial performance and efficiency in asset utilization. Generally, higher ROA values are more desirable, indicating better profitability and asset management.
Current Ratio: The current ratio is a liquidity ratio that assesses a company’s ability to meet its short-term liabilities with its short-term assets. A higher current ratio generally indicates a stronger capacity to cover immediate obligations, suggesting greater financial stability in the face of unexpected economic or business challenges. Celebrity Fashions has a Current ratio of 1.1882. While above 1, suggesting it can cover short-term liabilities with short-term assets, it is not exceptionally high, and a more robust current ratio would typically be preferred to ensure greater financial resilience.
Return on Equity (ROE): Return on Equity (ROE) is another critical profitability ratio that measures a company’s ability to generate profits from shareholders’ investments. ROE essentially indicates how much profit each rupee of common stockholders’ equity generates. Celebrity Fashions has an ROE of 6.0656%. This ROE suggests a moderate level of profitability generated from shareholders’ investments. While positive, it might be considered relatively low compared to industry benchmarks or high-performing companies, indicating room for improvement in generating returns for equity holders. Higher ROE values are generally favored by investors as they signify more effective utilization of shareholder capital to generate profits.
Debt to Equity Ratio: The debt-to-equity ratio is a leverage ratio that provides insights into a company’s capital structure, indicating the proportion of debt and equity used to finance its assets. It’s a useful metric for evaluating financial risk and capital management. Celebrity Fashions has a Debt to Equity ratio of 1.5817. This ratio suggests that Celebrity Fashions has a relatively high proportion of debt compared to equity in its capital structure. While not excessively high, it indicates a significant reliance on debt financing, which could increase financial risk, especially if the company faces difficulties in meeting its debt obligations. A lower debt-to-equity ratio is generally considered more conservative and financially stable.
Sales Growth: Sales growth is a crucial indicator of a company’s ability to expand its revenue over time, reflecting its market position and business performance. Celebrity Fashions has reported revenue growth of -5.9279%. This negative sales growth indicates a contraction in revenue, which is a concerning sign. Negative sales growth can stem from various factors, including declining market demand, increased competition, or company-specific challenges. This poor sales growth performance raises concerns about the company’s ability to maintain and expand its business operations and profitability in the future.
Operating Margin: The operating margin is a profitability ratio that reveals a company’s operational efficiency, indicating how much profit a company makes from its core business operations before interest and taxes. A higher operating margin signifies better operational management and cost control. Celebrity Fashions’ operating margin for the current financial year is 5.64765629560447%. This operating margin suggests a moderate level of operational profitability. While positive, it’s not exceptionally high and may indicate areas for improvement in operational efficiency and cost management to enhance profitability from core business activities.
Dividend Yield: Dividend yield is a financial ratio that indicates the percentage of a company’s share price that it pays out as dividends annually. It’s a measure of the return on investment from dividends alone. For the current year, the dividend for Celebrity Fashions is Rs 0, resulting in a dividend yield of 0%. This indicates that Celebrity Fashions is not currently distributing dividends to its shareholders. A zero dividend yield may be unattractive to income-seeking investors, although it’s not uncommon for companies, especially those focused on growth or facing financial challenges, to temporarily or permanently suspend dividend payments.
Earnings Per Share (EPS): Earnings Per Share (EPS) is a fundamental metric that indicates the portion of a company’s profit allocated to each outstanding share of common stock. EPS is a key indicator of profitability from a shareholder’s perspective, with higher EPS values generally being more favorable for investors. The latest EPS for Celebrity Fashions is Rs -3.0361. This negative EPS indicates that Celebrity Fashions is currently experiencing a loss per share. A negative EPS is a significant concern for investors as it reflects a lack of profitability and potential financial difficulties.
For investors seeking a more in-depth analysis, platforms like Ticker offer comprehensive financial ratios for Celebrity Fashions and other companies. Furthermore, to determine the intrinsic value of Celebrity Fashions stock and assess its investment merit, valuation calculators, such as those available with a Finology ONE subscription, can be valuable tools. These resources can aid in making more informed investment decisions regarding Celebrity Fashions Limited share price and overall financial health.
