Thirumalai Chemicals Limited (NSEI:TIRUMALCHM), a chemicals company 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 tend to present 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 Thirumalai Chemicals’s outlook and value based on the most recent financial data to see if the opportunity still exists. See our latest analysis for Thirumalai Chemicals
Is Thirumalai Chemicals still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Thirumalai Chemicals’s ratio of 19.3x is trading slightly below its industry peers’ ratio of 24.2x, which means if you buy Thirumalai Chemicals today, you’d be paying a reasonable price for it. And if you believe that Thirumalai Chemicals should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. In addition to this, it seems like Thirumalai Chemicals’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Thirumalai Chemicals 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. In Thirumalai Chemicals’s case, its revenues are expected to grow by 36.04% over the next year, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? Thirumalai Chemicals’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at Thirumalai Chemicals? Will you have enough conviction to buy should the price fluctuates below the true value?