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Himadri Speciality Chemical Limited (NSE:HSCL), which is in the chemicals business, and is based in India, saw a significant share price rise of over 20% 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 Himadri Speciality Chemical’s outlook and value based on the most recent financial data to see if the opportunity still exists.
See our latest analysis for Himadri Speciality Chemical
What's the opportunity in Himadri Speciality Chemical?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 10.68x is currently trading slightly below its industry peers’ ratio of 11.69x, which means if you buy Himadri Speciality Chemical today, you’d be paying a reasonable price for it. And if you believe that Himadri Speciality Chemical 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 Himadri Speciality Chemical’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.
Can we expect growth from Himadri Speciality Chemical?
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. Himadri Speciality Chemical’s earnings over the next few years are expected to increase by 54%, 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 HSCL’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 HSCL? Will you have enough confidence to invest in the company should the price drop below its fair value?