Are high FMCG valuations about to get in touch with reality?
While the sales growth situation looks promising for companies, this needs to trickle down to higher profit growth. About half of most FMCG companies' sales go towards meeting input costs
The packaged consumer goods sector’s sky- high valuations have appeared unrealistic for long, this column having written on it as well. The S&P BSE FMCG Index trades at a price-to-earnings multiple of 52 times its trailing 12-month earnings and this despite the index falling 4% this week so far. For these valuations to sustain, earnings growth has to step up in the coming quarters.