We assign a fundamental rating of 6 out of 10 to RDY. RDY was compared to 190 industry peers in the Pharmaceuticals industry. While RDY has a great profitability rating, there are some minor concerns on its financial health. RDY has a correct valuation and a medium growth rate.

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1. Profitability

2. Health

3. Growth

4. Valuation

5. Dividend

1. Profitability

1.1 Basic Checks

RDY had positive earnings in the past year.
RDY had a positive operating cash flow in the past year.
In the past 5 years RDY has always been profitable.
Each year in the past 5 years RDY had a positive operating cash flow.

1.2 Ratios

The Return On Assets of RDY (10.62%) is better than 91.58% of its industry peers.
RDY's Return On Equity of 16.03% is amongst the best of the industry. RDY outperforms 88.95% of its industry peers.
RDY has a Return On Invested Capital of 13.03%. This is amongst the best in the industry. RDY outperforms 92.11% of its industry peers.
The Average Return On Invested Capital over the past 3 years for RDY is above the industry average of 12.83%.

		Industry Rank	Sector Rank
ROA	10.62%
ROE	16.03%
ROIC	13.03%

ROA(3y)13.25%

ROA(5y)10.88%

ROE(3y)18.65%

ROE(5y)15.68%

ROIC(3y)15.26%

ROIC(5y)13.95%

1.3 Margins

Looking at the Profit Margin, with a value of 16.82%, RDY belongs to the top of the industry, outperforming 88.95% of the companies in the same industry.
In the last couple of years the Profit Margin of RDY has grown nicely.
RDY has a better Operating Margin (19.62%) than 86.84% of its industry peers.
In the last couple of years the Operating Margin of RDY has grown nicely.
Looking at the Gross Margin, with a value of 66.88%, RDY is in the better half of the industry, outperforming 75.79% of the companies in the same industry.
In the last couple of years the Gross Margin of RDY has remained more or less at the same level.

		Industry Rank	Sector Rank
OM	19.62%
PM (TTM)	16.82%
GM	66.88%

OM growth 3Y9.42%

OM growth 5Y4.7%

PM growth 3Y19.59%

PM growth 5Y8.42%

GM growth 3Y2.12%

GM growth 5Y0.39%

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ROA

ROE

ROIC

Operating and Profit Margin

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2. Health

2.1 Basic Checks

The Return on Invested Capital (ROIC) is just above the Cost of Capital (WACC), so RDY is still creating some value.
Compared to 1 year ago, RDY has about the same amount of shares outstanding.
The number of shares outstanding for RDY has been increased compared to 5 years ago.
RDY has a worse debt/assets ratio than last year.

2.2 Solvency

RDY has an Altman-Z score of 5.69. This indicates that RDY is financially healthy and has little risk of bankruptcy at the moment.
RDY has a Altman-Z score of 5.69. This is in the better half of the industry: RDY outperforms 75.79% of its industry peers.
The Debt to FCF ratio of RDY is 3.17, which is a good value as it means it would take RDY, 3.17 years of fcf income to pay off all of its debts.
The Debt to FCF ratio of RDY (3.17) is better than 88.95% of its industry peers.
A Debt/Equity ratio of 0.03 indicates that RDY is not too dependend on debt financing.
RDY has a Debt to Equity ratio (0.03) which is in line with its industry peers.

		Industry Rank	Sector Rank
Debt/Equity	0.03
Debt/FCF	3.17
Altman-Z	5.69

ROIC/WACC1.28

WACC10.18%

2.3 Liquidity

RDY has a Current Ratio of 1.85. This is a normal value and indicates that RDY is financially healthy and should not expect problems in meeting its short term obligations.
With a Current ratio value of 1.85, RDY is not doing good in the industry: 64.21% of the companies in the same industry are doing better.
A Quick Ratio of 1.35 indicates that RDY should not have too much problems paying its short term obligations.
RDY has a worse Quick ratio (1.35) than 67.37% of its industry peers.
The current and quick ratio evaluation for RDY is rather negative, while it does have excellent solvency and profitability. These ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.

		Industry Rank	Sector Rank
Current Ratio	1.85
Quick Ratio	1.35

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WACC

Debt/Equity

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Altman-Z score

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3. Growth

3.1 Past

RDY shows a small growth in Earnings Per Share. In the last year, the EPS has grown by 4.02%.
Measured over the past years, RDY shows a very strong growth in Earnings Per Share. The EPS has been growing by 23.62% on average per year.
Looking at the last year, RDY shows a quite strong growth in Revenue. The Revenue has grown by 11.06% in the last year.
The Revenue has been growing by 13.26% on average over the past years. This is quite good.

EPS 1Y (TTM)4.02%

EPS 3Y33.55%

EPS 5Y23.62%

EPS Q2Q%-13.5%

Revenue 1Y (TTM)11.06%

Revenue growth 3Y14.86%

Revenue growth 5Y13.26%

Sales Q2Q%6.11%

3.2 Future

The Earnings Per Share is expected to decrease by -1.42% on average over the next years.
RDY is expected to show a small growth in Revenue. In the coming years, the Revenue will grow by 6.63% yearly.

EPS Next Y-6.34%

EPS Next 2Y-8.18%

EPS Next 3Y-1.42%

EPS Next 5YN/A

Revenue Next Year5.1%

Revenue Next 2Y3.83%

Revenue Next 3Y5.5%

Revenue Next 5Y6.63%

3.3 Evolution

When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is decreasing.
The Revenue growth rate is decreasing: in the next years the growth will be less than in the last years.

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4. Valuation

4.1 Price/Earnings Ratio

A Price/Earnings ratio of 18.88 indicates a rather expensive valuation of RDY.
83.16% of the companies in the same industry are more expensive than RDY, based on the Price/Earnings ratio.
The average S&P500 Price/Earnings ratio is at 27.25. RDY is valued slightly cheaper when compared to this.
RDY is valuated rather expensively with a Price/Forward Earnings ratio of 22.11.
Based on the Price/Forward Earnings ratio, RDY is valued a bit cheaper than 76.84% of the companies in the same industry.
RDY's Price/Forward Earnings ratio indicates a similar valuation than the S&P500 average which is at 25.98.

		Industry Rank	Sector Rank
PE	18.88
Fwd PE	22.11

4.2 Price Multiples

RDY's Enterprise Value to EBITDA ratio is rather cheap when compared to the industry. RDY is cheaper than 85.26% of the companies in the same industry.
Based on the Price/Free Cash Flow ratio, RDY is valued a bit cheaper than 77.89% of the companies in the same industry.

		Industry Rank	Sector Rank
P/FCF	56.99
EV/EBITDA	11.27

4.3 Compensation for Growth

RDY has an outstanding profitability rating, which may justify a higher PE ratio.

PEG (NY)N/A

PEG (5Y)0.8

EPS Next 2Y-8.18%

EPS Next 3Y-1.42%

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5. Dividend

5.1 Amount

With a yearly dividend of 0.65%, RDY is not a good candidate for dividend investing.
Compared to an average industry Dividend Yield of 0.46, RDY pays a better dividend. On top of this RDY pays more dividend than 89.47% of the companies listed in the same industry.
Compared to an average S&P500 Dividend Yield of 1.82, RDY's dividend is way lower than the S&P500 average.

		Industry Rank	Sector Rank
Dividend Yield	0.65%

5.2 History

The dividend of RDY decreases each year by -19.44%.
RDY has paid a dividend for at least 10 years, which is a reliable track record.

Dividend Growth(5Y)-19.44%

Div Incr Years0

Div Non Decr Years0

5.3 Sustainability

RDY pays out 11.54% of its income as dividend. This is a sustainable payout ratio.
RDY's earnings and Dividend Rate are declining. This means the current dividend is most likely not sustainable.

DP11.54%

EPS Next 2Y-8.18%

EPS Next 3Y-1.42%

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DR. REDDY'S LABORATORIES-ADR / RDY FAQ

What is the ChartMill fundamental rating of DR. REDDY'S LABORATORIES-ADR (RDY) stock?

ChartMill assigns a fundamental rating of 6 / 10 to RDY.

What is the valuation status of DR. REDDY'S LABORATORIES-ADR (RDY) stock?

ChartMill assigns a valuation rating of 5 / 10 to DR. REDDY'S LABORATORIES-ADR (RDY). This can be considered as Fairly Valued.

What is the profitability of RDY stock?

DR. REDDY'S LABORATORIES-ADR (RDY) has a profitability rating of 8 / 10.

Can you provide the expected EPS growth for RDY stock?

The Earnings per Share (EPS) of DR. REDDY'S LABORATORIES-ADR (RDY) is expected to decline by -6.34% in the next year.

Is the dividend of DR. REDDY'S LABORATORIES-ADR sustainable?

The dividend rating of DR. REDDY'S LABORATORIES-ADR (RDY) is 4 / 10 and the dividend payout ratio is 11.54%.