Ques: Is steel sector undervalued since stocks are trading at PE of 3-6?? #NIFTYMETAL #TATASTEEL #JINDALSTEL
Ans: Please find attached Tata steel and Jindal steel earnings plot for last 15 years.
Steel stocks are trading at PE of 3-4 so they look undervalued but by looking at their earning cycles for last 15 years, one can see Earnings are near its peak. And so when E is Huge. PE will look small.
But in reality its not undervalued at all.
So now its all about logitivity of earnings. If it sustains, yes some made can be made here.
If not, downgrade will also be a big one.
In both cases risk reward is not favorable. (If you have bought at lower prices, you can hold for sure and see how things turn out in future, but will not recommand new position. )
Remember every peak looks like that its going to sustain this time.
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