Best High EPS Stocks to Buy in India 2024

In this article, we will discuss

• What is Earnings Per Share (EPS)?
• How to Calculate Earnings Per Share (EPS)
• Significance of Earnings Per Share (EPS)
• High EPS Stocks to Consider Investing in 2024
• Things to Keep in Mind Before Investing in High EPS Stocks
• Conclusion

One of the many metrics that long-term investors use to assess the potential of a stock is Earnings Per Share (EPS). It is a fundamental indicator that provides crucial information regarding a company’s profitability.

In this article, we are going to explore the concept of EPS, how to calculate it, the metric’s significance and look at some of the best EPS stocks currently listed on the Indian stock market.

What is Earnings Per Share (EPS)?

Earnings Per Share (EPS) is a financial metric that indicates the amount of profit a company makes for every share it has issued. It is expressed in Rupees per share, making it easier for investors to compare the performance of different companies irrespective of their size. Investors often prefer investing in companies with high EPS since it essentially signifies that the company is generating substantial profits relative to the number of shares issued.

How to Calculate Earnings Per Share (EPS)

Calculating the EPS of a stock is straightforward. All you need to do is use the following mathematical formula.

EPS = [(Net Income - Dividends) ÷ Number of Outstanding Equity Shares]

So, if a company’s net income at the end of a financial year is Rs. 25 crores, its preference share dividend payments amount to Rs. 2 crores and the number of outstanding equity shares amount to 80 lakhs, the EPS of the company would be

EPS = Rs. 28.75 [(Rs. 25 crores - Rs. 2 crores) ÷ 80 lakhs]

This essentially means that the company generates Rs. 28.75 as profits for every equity share it has issued.

Significance of Earnings Per Share (EPS)

The Earnings Per Share is a crucial metric that every long-term investor must look into. Here are some reasons why it is considered to be important.

• The EPS ratio provides insights into the profitability of a company on a per-share basis. The higher the ratio is, the better the company is deemed to be.
• It enables investors to compare the profitability of different companies within the same industry or sector.
• A consistently high or growing EPS is indicative of a financially healthy company, making it an attractive long-term investment.
• High EPS stocks are usually valued higher by the market, which eventually leads to an increase in their prices.
• High EPS suggests that a company has the potential to pay higher dividends to its shareholders.

High EPS Stocks to Consider Investing in 2024

Several high EPS stocks are listed and traded on the Indian stock market. Here is a table outlining the top 10 stocks in terms of EPS along with some of their key fundamental metrics. 

Note: All of the values in the table are valid as of May 20, 2024.

• MRF Limited

Established in 1946, MRF Limited started operations as a toy balloon manufacturing company. However, the company moved on to manufacturing tread rubber in 1952. Since then, MRF Limited has grown by leaps and bounds to become the largest manufacturer of tyres in India. Currently, the company has 10 tyre manufacturing facilities spread strategically across the country.

The MRF Limited’s product portfolio comprises tyres for cars, trucks, motorcycles and other motorised vehicles. In addition to tyres, the company also manufactures an extensive range of paints and coats, sports goods and toys. It is important to note that although the company has a high EPS ratio, its share price is also very high. This is something that you need to keep in mind when investing in the company.

• Bosch Limited

Bosch Limited, a subsidiary of the German engineering company - Robert Bosch GmbH, is one of the largest suppliers of technology and services in India. The company’s product and service portfolio spans multiple areas such as mobility solutions, industrial technology, consumer goods, energy and building technology. It also offers a plethora of power tools, security systems, thermotechnology and home appliances for the consumer market.

Owing to being a market leader in various segments, Bosch delivers strong operational performance consistently. The strong fundamentals coupled with its high earnings per share and a commitment to innovation and quality make the company one of the best EPS stocks to invest in for the long term.

• Shree Cements Limited

Founded in 1979, Shree Cements Limited is India's third-largest cement manufacturer thanks to its extensive manufacturing facilities located across the country. The company produces three different types of cement - Portland Slag Cement (PSC), Ordinary Portland Cement (OPC) and Portland Pozzolana Cement (PPC).

Recently, Shree Cements Limited has diversified its business by stepping into the power generation and Autoclaved Aerated Concrete (AAC) block manufacturing segments. The company is also committed to maintaining environmentally friendly practices and sustainable growth strategies.

• Honeywell Automation Limited

Honeywell Automation India Limited, a subsidiary of Honeywell International Inc., is a leading provider of automation and control solutions. Industrial automation and building automation are two of its major business verticals, where the company offers a wide range of products and services such as sensors, control systems, software solutions, and integrated automation systems.

Honeywell Automation Limited features in the Fortune India 500 list and employs more than 3,000 individuals in nine different cities. The company's unwavering focus on innovation and technological advancement combined with its high EPS ratio makes it an attractive long-term investment option.

• Abbott India Limited

Established in 1910, Abbott India is headquartered in Mumbai and is a subsidiary of Abbott Laboratories, which is a global healthcare company. Abbott India has a significant presence in the Indian pharmaceutical industry, offering a plethora of healthcare products across different segments such as pharmaceuticals, nutritional supplements, diagnostics and medical devices.

With over 600 products across therapeutic areas such as women's health, gastroenterology, cardiology and diabetes care, the company has a strong market position and the ability to generate profits consistently. 3M India Limited is a subsidiary of 3M Company, a global diversified technology company.

• 3M India Limited

Founded in 1987, 3M India Limited is a subsidiary of the American multinational entity - 3M Company. Headquartered in Bengaluru, the company manufactures products that are used in various segments including industrial, healthcare, consumer, safety and graphics.

From adhesives and abrasives to laminates and passive fire protection, 3M India’s innovative products and solutions are designed to improve efficiency, safety and productivity. Thanks to a diversified product portfolio, strong financial performance and market leadership, the company is one of the best EPS stocks to invest in for the long term.

• Page Industries Limited

Another Bengaluru-based company, Page Industries Limited was first established in 1994. The company is the exclusive licensee of Jockey International in India, Sri Lanka, Bangladesh, Nepal and the United Arab Emirates (UAE). The company manufactures and retails innerwear, leisurewear and sportswear for men, women and children under the Jockey brand.

Page Industries Limited also operates an extensive Jockey exclusive retail network throughout India in addition to an online platform to cater to a growing customer base. Apart from Jockey, the company is also an exclusive licensee of Speedo, a leading swimwear brand.

• Maruti Suzuki India Limited

Incorporated in 1981, Maruti Suzuki India Limited (MSIL) is the largest automobile manufacturer in India. The company offers a wide range of passenger cars across multiple segments such as hatchbacks, sedans, SUVs and vans. Many of the company’s models such as the Alto and Swift enjoy exceptional levels of popularity and are essentially a household name in India.

With a high EPS ratio, Maruti Suzuki India Limited demonstrates its strong financial health and ability to generate substantial profits consistently. The company's focus on innovation, quality and customer satisfaction makes it an attractive long-term investment option.

• Dr. Reddys Laboratories Limited

Dr. Reddys Laboratories Limited is one of the leading pharmaceutical companies in India. Headquartered in Hyderabad, the company operates in various segments including generic medicines, active pharmaceutical ingredients (APIs) and biosimilars.

Dr. Reddys’ pharmaceutical products are routinely used across therapeutic areas such as oncology, gastroenterology, cardiovascular and dermatology. In addition to enjoying a strong domestic presence, the company is also present in various international markets like Germany and South Africa.

One of the advantages of Dr. Reddys’ Laboratories Limited is its ability to develop affordable and innovative healthcare solutions, making it one of the best high EPS stocks to have in your portfolio.

• Force Motors Limited

Founded in 1958, Force Motors Limited is an Indian automobile manufacturer known for its commercial and utility vehicles. The company manufactures an extensive range of vehicles including vans, trucks, buses and SUVs.

The company has a strong presence in the domestic market and is slowly expanding its footprint in the international markets. In addition to manufacturing vehicles under the Force Motors brand, the entity also produces engines and axles for other leading automobile companies like BMW and Mercedes-Benz.

Things to Keep in Mind Before Investing in High EPS Stocks

As an investor, you must look into a few factors before investing in stocks with high Earnings Per Share. Here is a quick overview of some of the key aspects that you need to consider. 

• Other Fundamental Metrics

Although EPS is a crucial metric you must look into when investing, it is far from the only one. There are plenty of other key fundamental metrics that you must analyse along with EPS to get a comprehensive overview of the attractiveness of a company. P/E ratio, P/B ratio, dividend yield, Return on Equity, Debt to Equity and Current Ratio are a few examples of other financial metrics you must consider.

• Industry Trends

The overall trends and developments in the company's industry are other major factors you must consider when investing in high EPS stocks. Stocks with good earnings per share may still underperform if the industry trends are not favourable.

• Economic Factors

Macroeconomic factors can significantly impact the performance of even the best EPS stocks. Therefore, you must keep a close eye on interest rates, inflation and government policies when investing.

• Diversification

Diversifying your investments is one of the best ways to reduce investment risk. Although you might be tempted to invest in only high EPS stocks, consider investing in other companies as well.

Conclusion

High EPS stocks may offer the potential for substantial returns due to the increased profitability and efficiency of these companies. However, focusing too much on just one fundamental metric is inadvisable when picking stocks for your portfolio. A better, more holistic approach would be to consider other factors beyond EPS, such as market trends, economic conditions, individual financial goals and other fundamental metrics.

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