ACC Limited (NSEI:ACC), a construction materials company based in India, received a lot of attention from a substantial price movement on the NSEI in the over the last few months, increasing to ₹1823.35 at one point, and dropping to the lows of ₹1589.75. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether ACC’s current trading price of ₹1727.2 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at ACC’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for ACC
Is ACC still cheap?
According to my valuation model, the stock is currently overvalued by about 86%, trading at ₹1727.2 compared to my intrinsic value of ₹926.83. This means that the buying opportunity has probably disappeared for now. Furthermore, ACC’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
Can we expect growth from ACC?
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. ACC’s earnings over the next few years are expected to increase by 78.90%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? ACC’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe ACC should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on ACC for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for ACC, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.