Is TVS Motor Looking At Weakness Ahead?

Is TVS Motor ripe for a correction?

Agam Vakil @AgamVakil

08 Dec 2016, 07:18 AM IST

K.N Radhakrishnan, President of TVS Motors (Photographer: Namas Bhokani/Bloomberg)

TVS Motor Company Ltd. currently trades at a price to earnings ratio of 39 times, which is considerably higher than its previous 7-year average of nearly 27 times.

In fact, TVS’ price to earnings is substantially higher than its much larger peers. Hero MotoCorp currently trades at 21 times, while Bajaj Auto trades at nearly 22 times. And the current P/E ratios of both Hero and Bajaj are nearly at par with their previous 7-year averages.

Moreover, both Hero and Bajaj currently trade at prices below their Bloomberg consensus 12-month target, with a return potential of 4 to 5 percent. TVS on the other hand, trades at a price which is 5 percent higher than its Bloomberg consensus.

Not surprisingly, 58 percent of analysts tracked by Bloomberg have a sell rating on TVS as compared to 20 percent for both Hero and Bajaj.

This then leads us to the question: Is TVS Motor looking at weakness ahead?