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Tax, Mutual Fund Expert - Answered on Apr 06, 2023

Asked on - Apr 05, 2023Translate

I purchased AWL (Adani) 647 Rs for 550 shares, now what I can do... Sale or wait
Ans: Dear Rakesh,

Thank you for reaching out for financial advice regarding your investment in Adani Wilmar Limited (AWL).

As you mentioned, AWL is currently trading at Rs 412 with a trailing PE (Price-to-Earnings) ratio of 73 and an ROCE (Return on Capital Employed) of 20%. A high PE ratio generally indicates that the market has high expectations for a company's future growth. However, whether these expectations are realistic depends on various factors like the company's financial health, industry growth, and overall market sentiment.

In the case of AWL, a PE ratio of 73 seems to be on the higher side, suggesting that the market is pricing in substantial growth expectations. As a financial advisor, I share your concern that this PE ratio may not be sustainable, considering the industry average and other market factors.

Although I cannot provide an exact suitable PE ratio for the industry without further information, a more reasonable range for the industry might be around 15-25x, depending on the specific sector within the industry and the growth prospects for individual companies. If we were to assume a more conservative PE ratio of 20x for Adani Wilmar, this would translate into a share price of approximately Rs 235 [(20 * Earnings per share) - assuming the company's earnings remain constant].

It's essential to consider other factors like the company's financial health, growth prospects, and industry outlook before making any investment decisions. I would advise you to evaluate your investment goals, risk tolerance, and time horizon before deciding whether to hold, sell, or buy more shares in AWL.
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.


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