Supreme Infrastructure India Limited (NSEI:SUPREMEINF), a construction and engineering company based in India, led the NSEI gainers with a relatively large price hike in the past couple of weeks. 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 examine Supreme Infrastructure India’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. See our latest analysis for Supreme Infrastructure India
What’s the opportunity in Supreme Infrastructure India?
According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that Supreme Infrastructure India’s ratio of 1.34x is trading slightly below its industry peers’ ratio of 2.09x, which means if you buy Supreme Infrastructure India today, you’d be paying a relatively fair price for it. And if you believe that Supreme Infrastructure India should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Supreme Infrastructure India’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.
What kind of growth will Supreme Infrastructure India generate?
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. 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. Supreme Infrastructure India’s earnings over the next few years are expected to increase by 98.30%, 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? It seems like the market has already priced in Supreme Infrastructure India’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 Supreme Infrastructure India? Will you have enough confidence to invest in the company should the price drop below its fair value?