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Vinyl Chemicals (India) Ltd. (NSE:VINYLINDIA), which is in the trade distributors business, and is based in India, saw a double-digit share price rise of over 10% in the past couple of months on the NSEI. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Vinyl Chemicals (India)’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for Vinyl Chemicals (India)
Is Vinyl Chemicals (India) still cheap?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Vinyl Chemicals (India)’s ratio of 17.26x is trading slightly below its industry peers’ ratio of 19.94x, which means if you buy Vinyl Chemicals (India) today, you’d be paying a fair price for it. And if you believe Vinyl Chemicals (India) should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. Furthermore, Vinyl Chemicals (India)’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
Can we expect growth from Vinyl Chemicals (India)?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. With profit expected to more than double in the upcoming, the future appears to be extremely bright for Vinyl Chemicals (India). 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? VINYLINDIA’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at VINYLINDIA? Will you have enough confidence to invest in the company should the price drop below its fair value?