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IFB Industries Limited (NSE:IFBIND), which is in the consumer durables business, and is based in India, saw a double-digit share price rise of over 10% in the past couple of months on the NSEI. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at IFB Industries’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Check out our latest analysis for IFB Industries
Is IFB Industries still cheap?
According to my relative valuation model, the stock is currently overvalued. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 53.34x is currently well-above the industry average of 25.55x, meaning that it is trading at a more expensive price relative to its peers. In addition to this, it seems like IFB Industries’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will IFB Industries generate?
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. With profit expected to grow by 24.5% over the next year, the near-term future seems bright for IFB Industries. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? IFBIND’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe IFBIND 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 IFBIND for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for IFBIND, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.