These stocks could return over 15% in a year post EPS upgrades (2024)

Mumbai: In the January-March period, when analysts at brokerages downgraded earnings estimates of more than half of the companies of NSE 500 index, about 40 stocks witnessed upgrades. According to analyst consensus estimates compiled by Bloomberg, 22 stocks could return over 15% returns in the next one year.

These include Ramco Cements, Gujarat Gas, Laxmi Organics, BPCL, Emami, Motilal Oswal Financial Services, Chemplast Sanmar, DLF, Apollo Hospitals, Hindustan Unilever, and Indian Oil, among others. These companies have seen a 15-75% upgrade in earnings estimates.

Analysts said many of these stocks have fallen in the past few weeks even as analysts raised their earnings estimates. The increase has mostly happened in oil marketing companies and consumer-facing companies such as HUL, Emami and Hero Motocorp among others.

"Amongst low beta, we prefer sectors with reasonable valuations but depressed demand or earnings such as autos, FMCG, private banks, versus the expensive and fast-growing such as durables, internet and chemicals," said Aditya Narain, head of research at Edelweiss. "The former is exposed to rural (beneficiary of higher food prices), while the latter to a higher risk of any slowdown shock."

ET has compiled a list of stocks that have seen EPS upgrade of over 7% in the three months and could give more than 15% returns over the next 12 months.

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I am an expert in financial markets and investment analysis with a deep understanding of the concepts and terminology used in the article you provided. My expertise is demonstrated by my comprehensive knowledge of the following concepts:

1. Earnings Estimates: Earnings estimates are projections made by financial analysts regarding a company's future earnings. These estimates are crucial for investors as they provide insights into a company's potential profitability, which can influence stock prices.

2. NSE 500 Index: The NSE 500 Index is a stock market index in India that tracks the performance of the top 500 companies listed on the National Stock Exchange (NSE). It is a broad market index representing a diverse range of companies.

3. Analyst Consensus Estimates: Analyst consensus estimates refer to the average of earnings estimates provided by financial analysts who cover a particular stock or market. These estimates can serve as a barometer of market sentiment and expectations.

4. Stock Upgrades and Downgrades: Stock upgrades occur when analysts revise their earnings estimates for a company upward, indicating increased optimism about its future performance. Conversely, stock downgrades signify a reduction in earnings expectations.

5. Stock Returns: Stock returns represent the percentage change in a stock's price over a specific time period. In the article, the focus is on stocks that are expected to yield returns of over 15% in the next year based on analysts' estimates.

6. Companies with Earnings Upgrades: The article highlights specific companies that have experienced upgrades in their earnings estimates. These upgrades can be seen as a positive sign and may attract investor interest.

7. Sectors: The article mentions different sectors within the stock market, such as autos, FMCG (Fast-Moving Consumer Goods), private banks, durables, internet, and chemicals. Each sector has its own dynamics and can be influenced by various economic factors.

8. Beta: The term "low beta" is used, which refers to stocks that are less volatile than the overall market. It indicates that these stocks may be relatively stable in price movements.

9. Valuations: Valuations refer to the assessment of a company's worth or the attractiveness of its stock based on various financial metrics. Reasonable valuations are preferred by investors as they may offer better risk-adjusted returns.

10. Demand and Earnings: The article discusses sectors with depressed demand or earnings, such as autos and FMCG, and contrasts them with sectors that are considered expensive and fast-growing, like durables, internet, and chemicals. This highlights the importance of understanding industry trends and macroeconomic factors.

11. Risk Management: The mention of a higher risk of any slowdown shock in certain sectors underscores the importance of risk management in investment decisions.

12. Financial News Sources: The article references Bloomberg and Economic Times (ET) as sources for analyst consensus estimates and market news. These are well-known financial news platforms.

In conclusion, the article discusses the performance and prospects of specific stocks and sectors within the NSE 500 Index, providing insights into earnings estimates, stock upgrades, and investment strategies. It underscores the importance of thorough research and analysis when making investment decisions in the stock market.