Greaves Cotton (GREAVESCOT)

FairStock Score: 23/100 — RISKY

Score breakdown: P/E: 0/3 · ROCE: 0/2 · Growth: 2/2 · Dividend: 0/1

Key Financials

Strengths

• Low leverage: Debt/Equity of 0.12 keeps the balance sheet safe if the cyclical downturn persists.
• Piotroski F-Score of 7/9 points to generally improving profitability, operating efficiency and liquidity.
• Promoter holding of 55.80% aligns management with minority shareholders.
• Trailing sales growth of 16.64% and profit growth of 26.37% show top-line and bottom-line momentum.
• ROE of 15.93% is respectable, and the 1.31% dividend yield provides some return while waiting.

Concerns

• Latest quarter net profit is just ₹6 crore on ₹875 crore of sales, implying a net margin of roughly 0.7%.
• ROCE of only 5.13% indicates weak return on capital employed for a manufacturing business.
• Valuation is rich: P/E of 32.80, P/B of 2.83 and PEG of 1.53 leave little margin of safety.
• The stock is about 41% below its 52-week high and carries a FairStock Score of 26/100, signalling elevated risk.

AI Analysis

As a value investor, I begin with a business that can earn high returns on capital. Greaves Cotton fails that test today: ROCE is just 5.13%, and the latest quarter reveals the cyclical squeeze—₹875 crore of sales generated only ₹6 crore of net profit, a margin of less than 1%. Such earnings power does not justify a P/E of 32.80 or a P/B of 2.83 when book value is ₹56.41. With the stock at ₹159.60, I am being asked to pay more than 32 times earnings for a company whose quarterly profit is razor-thin. That is the opposite of Graham's margin of safety. I do credit the balance sheet. Debt/equity of 0.12 is conservative, and the Piotroski F-Score of 7/9 suggests recent financials are improving. Promoter holding of 55.80% means management's interests are largely aligned with mine. Sales growth of 16.64% and profit growth of 26.37% look encouraging, but a PEG of 1.53 tells me the market already expects this growth. Meanwhile, the stock has fallen from ₹272 to ₹159.60—the market smells trouble, and a FairStock score of 26/100 agrees. The dividend yield of 1.31% gives little compensation while I wait. In compressors, pumps and diesel engines, earnings are tied to industrial and agri cycles; this may be a cyclical trough rather than permanent decay. But as Graham said, the price you pay determines your return. At 32.8 times earnings, with ROCE at 5.13%, I see risk, not value. I would want a much lower price, or sustained evidence of higher returns, before committing capital. Patience is the wise course.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer