Which type of firm has belowaverage sensitivity to business

Which type of firm has below-average sensitivity to business cycles? Why? List five firms, their tickers, and current PE ratios relative to an appropriate index.

Solution

The following type industries with below-average sensitivity to the state of the economy:-

1) produce goods for which sales and profits are least sensitive to the state of the economy
Eg;- food producers, pharmaceutical firms, public utilities.
2) Tend to outperform other firms when the economy enters a recession
3) low betas, show best results when economic news is negative

Note:- Business cycle sensitivity will be reflected in the beta of the stock, and hence the expected return on the stock in CAPM.

Below are the top 5 firms with their relavant PE Ratios :-

1) Kisan Mouldings :-

P/E is 13,700.00

Last price is 138

CEPS is 4.19

EPS is 0.01

2) Ujjivan Fiananci :-

P/E is 12,386.67

Last price is 371.60

CEPS is 0.04

EPS is 0.03

3) Bharat Agri:-

P/E is 7,300

Last price is 146

CEPS is 5.69

EPS is 0.02

4) Modi naturals:-

P/E is 4,950

Last price is 99

CEPS is 1.17

EPS is 0.02

5) Weslife Dev:-

P/E is 3,348.18

Last price is 368.30

CEPS is 0.11

EPS is 0.11