In a curious development, Stylecraft, a little-known textile company, last week became the second most valued stock on the Dhaka Stock Exchange (DSE), beating the consistently top-performing British American Tobacco Bangladesh (BATBC).

Within a space of six months, stocks of Stylecraft soared 147.23 percent to Tk 3,911.3. In contrast, Rahim Textile, the second most valued textile stock, was selling at Tk 412 on Thursday, the last trading day.

In a similar development, Monno Jute Stafflers, a mediocre performer, became the most valued stock at Tk 4,639.40. The abnormal price hike prompted the stock market regulator to suspend trading of Monno's stocks on August 16.

In contrast, shares of BATBC traded at Tk 3,389.

Both the companies have informed several times through the DSE that there is no reason for the unusual price hike of their shares, but investors kept pouring in money.

Poorly performing companies are becoming high valued stocks all on a sudden, said Mohammed Rahmat Pasha, managing director of UCB Capital Management.

“This is very risky and concerning for the stock market.” Subsequently, he advised the regulator take actions promptly -- like it did in case of Monno Jute -- such that rogue players are discouraged and investors put their money in stocks that show profits and steady business growth.

Styelcraft's profit is much higher than Monno Jute's but it is much less than BATBC's, though both the stocks' prices are higher than the cigarette maker's.

In the first quarter of 2018, BATBC's earnings per share stood at Tk 45.82. In contrast, Stylecraft's EPS was Tk 12.18 and Monno Jute's Tk 1.43.

It was a similar story the previous year: BATBC's EPS was Tk 130.50, Stylecraft's Tk 52.47 and Monno Jute's Tk 0.57.

BATBC declared 600 percent dividend in 2017, while Stylecraft announced 90 percent dividend and Monno Jute 15 percent.

DSE data shows the price-earnings ratio of BATBC is 25.98, whereas Stylecrft's is 134.18 and Monno Jute's 9,278.8.

If the P/E is high, it indicates an overpriced stock. It means the stock's price is much higher than its actual growth potential, so the stock is more liable to crash drastically unless the company logs higher growth in profits.

Monno Jute and Stylecraft gave same news separately that they planned to increase their authorised capital to Tk 100 crore from Tk 1 crore.

The only additional news of Stylecraft was it will increase production approximately 23 percent by adding six new lines.

The news came on March 29, after which the company's share price catapulted 145.68 percent.

“This company's share price cannot jump at this speed with this news,” said Abu Ahmed, former chairman of Dhaka University's economics department and a stock market analyst.

When the paid-up capital will increase, the EPS will slump as profits will not soar right after.

“Moreover, the stock price rising to this level is totally baseless,” he said, while insinuating that rogue players are manipulating the prices of the stocks of Stylecraft and Monno Jute Stafflers.