NYKAA - Investment Analysis: Buy Signal or Bull Trap?
Back to ListInvestment Rating: 2.5
| Stock Code | NYKAA | Market Cap | 71,385 Cr. | Current Price | 249 ₹ | High / Low | 273 ₹ |
| Stock P/E | 1,111 | Book Value | 5.98 ₹ | Dividend Yield | 0.00 % | ROCE | 6.25 % |
| ROE | 6.10 % | Face Value | 1.00 ₹ | DMA 50 | 250 ₹ | DMA 200 | 233 ₹ |
| Chg in FII Hold | -0.39 % | Chg in DII Hold | 0.37 % | PAT Qtr | 12.2 Cr. | PAT Prev Qtr | 12.9 Cr. |
| RSI | 54.6 | MACD | -3.71 | Volume | 32,86,900 | Avg Vol 1Wk | 47,46,804 |
| Low price | 155 ₹ | High price | 273 ₹ | PEG Ratio | -550 | Debt to equity | 0.08 |
| 52w Index | 79.7 % | Qtr Profit Var | -24.2 % | EPS | 0.22 ₹ | Industry PE | 46.9 |
📊 Analysis: NYKAA shows weak fundamentals for long-term investment. ROCE (6.25%) and ROE (6.10%) are low, indicating poor capital efficiency. EPS of 0.22 ₹ is very weak relative to valuation. Debt-to-equity at 0.08 is manageable, but the P/E ratio (1,111) is extremely high compared to the industry average (46.9), suggesting severe overvaluation. Dividend yield is 0%, offering no income support. PEG ratio of -550 highlights unsustainable valuation relative to growth. Technically, the stock is trading near DMA 50 (250 ₹) and above DMA 200 (233 ₹), with RSI at 54.6 (neutral) and MACD negative, suggesting consolidation with limited upside.
💰 Ideal Entry Zone: 160 ₹ – 190 ₹ (closer to 52-week low, offering margin of safety and better valuation comfort).
📈 Exit / Holding Strategy: If already holding, consider exiting on rallies near 260–270 ₹ (close to 52-week high zone). Long-term holding is not advisable unless ROE and ROCE improve significantly. Current metrics suggest weak growth potential, so capital may be better deployed in stronger consumer-tech or retail peers.
Positive
- Debt-to-equity ratio of 0.08 shows low leverage.
- DII holdings increased (+0.37%), reflecting domestic institutional support.
- Strong trading volume (32.8 lakh), showing investor interest.
Limitation
- Extremely high P/E ratio (1,111) compared to industry average (46.9).
- Low ROCE (6.25%) and ROE (6.10%), showing poor capital efficiency.
- EPS of 0.22 ₹ is very weak.
- Dividend yield of 0% offers no shareholder returns.
- PEG ratio of -550 highlights valuation concerns.
Company Negative News
- Decline in FII holdings (-0.39%), showing reduced foreign investor confidence.
- Quarterly profit variation -24.2%, reflecting earnings slowdown.
Company Positive News
- Stable PAT performance (12.2 Cr. vs 12.9 Cr.), showing consistency despite weak margins.
- DII holdings increased, reflecting domestic institutional confidence.
Industry
- Industry PE at 46.9, far below company’s valuation, highlighting overvaluation.
- E-commerce and retail sector benefits from digital adoption and consumer demand, but profitability remains critical.
Conclusion
⚠️ NYKAA is not a strong candidate for long-term investment due to poor ROE, ROCE, weak EPS, and unsustainable valuation. Entry only makes sense near deep value zones (160–190 ₹) for short-term recovery trades. Long-term investors should avoid or exit on rallies unless fundamentals improve significantly.
Selva, would you like me to extend this into a peer benchmarking overlay with e-commerce and retail peers (like Zomato, Delhivery, Trent) so you can compare relative strength and margin-of-safety positioning for your basket rotation strategy?