Investors who had the foresight to invest in MRF stock two decades ago have reaped substantial rewards. On June 13, 2023, MRF became the first Indian stock to touch the impressive milestone of ₹1 lakh per share. With a market capitalization of approximately ₹42,000 crore, the company’s technical chart analysis indicates the potential for further growth.
The journey of MRF’s stock price has been remarkable over the past 20 years. Starting at ₹1,175 on June 13, 2003, the shares have skyrocketed to a staggering all-time high of ₹1,00,300 on June 13, 2023. This phenomenal growth translates to a remarkable multibagger return of 8,436 percent. To put it into perspective, an investment of ₹1 lakh in MRF two decades ago would have ballooned to ₹85.36 lakh by now.
It’s noteworthy that MRF shares experienced a significant low point, reaching ₹65,900.05 on BSE on June 17, 2022. However, since then, the stock has shown strong resilience, currently up 50 percent from that level.
Analyzing the performance of MRF stock over the past decade, it has outperformed the benchmark Sensex on seven occasions. However, there was a period of underperformance between 2018 and 2021. In the year 2023 so far, MRF shares have recorded a 12 percent increase, while the benchmark Sensex has seen a gain of only 4 percent.
As of the most recent quarter, the market capitalization of MRF stands at approximately ₹42,000 crore. Additionally, the latest shareholding data reveals that the promoters’ holdings in the company have slightly decreased from 27.87 percent in the December 2022 quarter to 27.84 percent in the March 2023 quarter.
Considering whether it is advisable to purchase MRF stock, it is important to assess its valuation. Although the stock is priced at a premium, it does not necessarily indicate it is expensive. MRF’s current price-to-earnings ratio (PE) stands at 51, which is still below its trailing 12-month PE ratio of 55.
Sonam Srivastava, Founder at Wright Research, emphasizes that a stock’s price alone is not a reliable indicator of its value. Factors such as market capitalization, price-to-earnings ratio, earnings, and growth prospects must be taken into account to evaluate the true worth of a stock.
Market capitalization considers a company’s total value based on its stock price and outstanding shares, while the P/E ratio compares a company’s share price to its per-share earnings, providing insight into its growth potential.
Srivastava advises that a high-priced stock may be justified by strong earnings and future growth prospects. Conversely, low-priced penny stocks can still be expensive due to their higher risk levels, susceptibility to price manipulation, and higher trading costs. Therefore, conducting thorough research and evaluating a company’s intrinsic value and future prospects are vital before making an investment decision.
Analysts suggest that investors may consider buying MRF stock for the long term if they have the financial means to do so. Gaurav Bissa, VP at InCred Equities, highlights MRF’s recent strong performance, which has consistently outperformed the broader market indices.
Bissa points out that the stock is currently forming a bullish flag pattern on the weekly charts, indicating a continuation of the upward trend. After breaking out and retesting the ₹95,000 level, a close above ₹1 lakh would confirm the bullish flag breakout, potentially propelling the stock to ₹1,15,000. Bissa also notes the positive setup on the point and figure charts.
Santosh Meena, Head of Research at Swastika Investmart, identifies a classical flag formation in MRF’s technical chart analysis, indicating further growth potential. This pattern suggests that the stock’s upward momentum is expected to persist, with a potential target of around ₹1,10,000. Meena emphasizes that even if there are temporary pullbacks, the previous breakout level of ₹95,000 is anticipated to provide strong support and act as a solid foundation for the stock.
In conclusion, MRF’s remarkable journey to reach ₹1 lakh per share highlights the potential for significant returns on long-term investments. However, thorough analysis of various factors and market conditions is essential before making any investment decisions.
