Rich valuation likely to cap further gains in Colgate shares

Stock up nearly 6% in past two weeks, hit new 52-week highs in recent trading sessions

The sharp rise in shares of Colgate Palmolive in the past couple of weeks in the wake of strong second quarter earnings performance is likely to cap further gains in the stock, feel analyst.

"The stock is trading at 30.1 times its 2014 estimated earnings per share. We see limited upside in the stock price from the current levels. Hence, we maintain our neutral rating on the stock," V Srinivasan, analyst with Angel Broking, said.

In the past two weeks Colgate shares have gained nearly 6 per cent and made new 52-week highs in recent trading sessions. Even today, the shares touched a new 52-week high of Rs 1,303.80 on the National Stock Exchange (NSE).

In July-September, Colgate reported 45.5 per cent year-on-year growth in net profit while its net sales expanded by close to 18 per cent on the back of higher volumes and improved market share.

"During financial years 2012-14, we expect Colgate to report 15.2 per cent CAGR (compound annual growth rate) in its top line and 13.8 per cent CAGR in its earnings," Srinivasan said.

At 12:26 PM, Colgate shares were traded at Rs 1,295.70 on NSE, up 1.9 per cent from previous close.