ITC stock is being beaten by meme creator these days. Does it deserves?
ITC Limited is a holding company engaged in the marketing of fast moving consumer goods (FMGC). The Company operates through four segments: FMCG; Hotels; Paperboards, Paper and Packaging; and Agri Business.
ITC is underperforming even during positive sentiment. Since 2014, the ITC stock has given annual returns of 0.77% when compared with 12.40% by the Nifty 50. The return on equity (ROE) of the business is falling – for FY20 it was at 23%. Now For FY21, ROE is currently at -1.68%
When we are comparing the return for the period of 2000-2021, ITC gives price return around 12% CAGR. At the same period, its peers Nestle on the other hand has delivered 20.3% CAGR. Standalone tobacco companies like Altria has delivered 16%, while British American Tobacco (BAT) has returned 10%. Dividend yields by tobacco companies are in the same range.
ITC has invested around INR 88,100 crore in the non-cigarette business since 2002 and many small investors says that it is not good to play around with the capital in non-cigarette business. It is not the right feel considering the global vision for tobacco industries.
This vision can be easily foreseen when we look at the ESG score (environmental, social and corporate governance) of the companies. Market funds of tobacco companies is currently around 1.6 trillion USD which is much lesser compared to the funds in four years ago.
ITC accounts for 11% of the total market capitalisation for cigarette companies across the world at 3,382 million USD. It is the top company in terms of market cap but at the same time it is ranked 31 on the ESG score at 48.92. Previous days, FIIs investing in a company which have good EPS (earnings per share). But now a days, FIIs are concentrating on ESG score.
Does ITC deserve for the memes?
Financial tweeters are in the middle on whether it is a value stock or a value trap. D Muthukrishnan who tweets under @dmuthuk. He feels that ITC is one of the best stocks for long-term investing. He has got into arguments with Twitter celebrity investors related to ITC. On March 28, he had tweeted, “I invested in the businesses of ITC and sharing my thoughts on the same. My critics are focusing on price movements of ITC and mocking me on the same. Business performance and price would definitely converge. It's beyond my ability to predict when. So, continue your criticism.”
Before deciding whether this stock deserves all these memes, let us see some valuations.
From the below valuation metrics, we can vote to buy ITC under valuation segments.
Forecast & ratings as below, shows that the ITC to be bought under our portfolio. Price forecast of this stocks showing very good sign for the investors. When we speaking about the dividend payout, this stock ranks # 1 and for Valuation it ranks # 2 next to Godfrey Phillips India Ltd.
In upcoming days, hotel business are about to grow in larger scales since the vaccination programmes have been increasing all over the world and India can expect better tourism revenues which will subsequently increase the revenue of ITC hotel business. Also ITC is continuously looking for active acquisitions. ITC chairman and managing director, Sanjiv Puri, says that with vaccination picking up pace, consumers will gain confidence and the economy will recover progressively and it will actively looking for good acquisitions. Recently the company ITC's sunfeast acquired Bangladeshi potato biscuit brand and it will be available first in south India, West Bengal and markets in north-eastern states.
Considering all the factors, Chipper stocks will recommend ITC to be in the short term and long term portfolio's.