In This Article:
Sarla Performance Fibers Limited (NSE:SARLAPOLY), a ₹2.6b small-cap, operates in the consumer discretionary industry, whose performance is predominantly driven by consumer confidence. Macro elements tend to determine how fast, and how often, consumers buy luxury goods. Consumer discretionary analysts are forecasting for the entire industry, a strong 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. Today, I’ll take you through the sector growth expectations, and also determine whether Sarla Performance Fibers is a laggard or leader relative to its consumer discretionary sector peers.
View our latest analysis for Sarla Performance Fibers
What’s the catalyst for Sarla Performance Fibers’s sector growth?
Significant store closures were an sign of changing consumer taste and rising online competition. In the previous year, the industry saw growth in the teens, though still underperforming the wider Indian stock market. Sarla Performance Fibers lags the pack with its negative growth rate of -29% 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 59% in the upcoming year. This future growth may make Sarla Performance Fibers a more expensive stock relative to its peers.
Is Sarla Performance Fibers and the sector relatively cheap?
The luxury goods sector’s PE is currently hovering around 13.63x, relatively similar to the rest of the Indian stock market PE of 17.55x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. However, the industry returned a lower 7.4% compared to the market’s 9.5%, potentially indicative of past headwinds. On the stock-level, Sarla Performance Fibers is trading at a PE ratio of 11.37x, which is relatively in-line with the average luxury goods. stock. In terms of returns, Sarla Performance Fibers generated 8.9% in the past year, which is 1.5% over the luxury goods. sector.
Next Steps:
Sarla Performance Fibers’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given the stock is trading in-line with its peers. If Sarla Performance Fibers has been on your watchlist for a while, now may be the time to enter into the stock. If you like its growth prospects, you’ll be paying a fair value for the company. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time. However, before you make a decision on the stock, I suggest you look at Sarla Performance Fibers’s fundamentals in order to build a holistic investment thesis.