Geekay Wires Limited (NSEI:GEEKAYWIRE), a INR₹295.79M small-cap, operates in the basic materials industry which supplies materials for construction. This means it is highly sensitive to changes in the economic cycle, a key driver of building activities. Basic material analysts are forecasting for the entire industry, a strong double-digit growth of 16.97% in the upcoming year . Today, I will analyse the industry outlook, as well as evaluate whether Geekay Wires is lagging or leading in the industry. Check out our latest analysis for Geekay Wires
What’s the catalyst for Geekay Wires’s sector growth?
Overall, the basic materials sector seems to be predominantly mature in terms of its industry life cycle. Companies appear to be highly competitive and consolidation seems to be a inevitable. However, the industry is still facing many emerging trends including the reduction of waste, raw material inflation, and innovation in global supply chain management. Over the past year, the industry saw growth in the twenties, beating the Indian market growth of 12.80%. Geekay Wires leads the pack with its impressive earnings growth of over 100% last year. This proven growth may make Geekay Wires a more expensive stock relative to its peers.
Is Geekay Wires and the sector relatively cheap?
Metals and mining companies are typically trading at a PE of 23x, relatively similar to the rest of the Indian stock market PE of 26x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 8.11% on equities compared to the market’s 9.83%. On the stock-level, Geekay Wires is trading at a PE ratio of 27x, which is relatively in-line with the average metals and mining stock. In terms of returns, Geekay Wires generated 11.37% in the past year, which is 3.26% over the metals and mining sector.
What this means for you:
Are you a shareholder? Geekay Wires recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders, and the stock is currently trading in-line with its peers. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto Geekay Wires as part of your portfolio. However, if you’re relatively concentrated in metals and mining, you may want to value Geekay Wires based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If Geekay Wires has been on your watchlist for a while, now may be the time to enter into the stock. If you like its proven ability to generate growth, you’ll be paying a fair value for the company, given that it is trading relatively in-line with its peers. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time.