In This Article:
Arvind Limited (NSE:ARVIND), a ₹83.1b small-cap, is a consumer discretionary company operating in an industry, whose sales are driven primarily by consumer sentiment and access to capital. These macro factors tend to determine the rate at which consumers purchase luxury goods. Consumer discretionary analysts are forecasting for the entire industry, a positive double-digit growth of 25% in the upcoming year , and an enormous growth of 72% over the next couple of years. the growth rate of the Indian stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether Arvind is a laggard or leader relative to its consumer discretionary sector peers.
Check out our latest analysis for Arvind
What’s the catalyst for Arvind’s sector growth?
E-commerce continues to be the fastest growing sales platform, changing the retail landscape. In the past year, the industry delivered growth in the teens, though still underperforming the wider Indian stock market. Arvind lags the pack with its lower growth rate of 5.5% over the past year, which indicates the company has been growing at a slower pace than its luxury goods. peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 46% in the upcoming year. This future growth may make Arvind a more expensive stock relative to its peers.
Is Arvind and the sector relatively cheap?
The luxury goods sector’s PE is currently hovering around 13.53x, in-line with the Indian stock market PE of 17.34x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a lower 7.3% compared to the market’s 9.4%, potentially indicative of past headwinds. On the stock-level, Arvind is trading at a higher PE ratio of 26.88x, making it more expensive than the average luxury goods. stock. In terms of returns, Arvind generated 7.9% in the past year, in-line with its industry average.
Next Steps:
Arvind’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this higher growth prospect is also reflected in the company’s price, suggested by its higher PE ratio relative to its peers. If Arvind has been on your watchlist for a while, now may not be the best time to enter into the stock since it is trading at a higher valuation compared to other luxury goods companies. However, before you make a decision on the stock, I suggest you look at Arvind’s fundamentals in order to build a holistic investment thesis.