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IntraSoft Technologies Limited (NSE:ISFT), which is in the online retail business, and is based in India, saw a significant share price rise of over 20% in the past couple of months on the NSEI. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on IntraSoft Technologies’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for IntraSoft Technologies
What is IntraSoft Technologies worth?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that IntraSoft Technologies’s ratio of 28.75x is trading slightly above its industry peers’ ratio of 27.96x, which means if you buy IntraSoft Technologies today, you’d be paying a relatively fair price for it. And if you believe that IntraSoft Technologies should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since IntraSoft Technologies’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from IntraSoft Technologies?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to more than double in the upcoming, the future appears to be extremely bright for IntraSoft Technologies. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in ISFT’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at ISFT? Will you have enough conviction to buy should the price fluctuate below the true value?