Sadbhav Infrastructure Project Limited (NSE:SADBHIN), is not the largest company out there, but it 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 Sadbhav Infrastructure Project’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What’s the opportunity in Sadbhav Infrastructure Project?
Good news, investors! Sadbhav Infrastructure Project is still a bargain right now according to my price multiple model, which compares the company’s price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Sadbhav Infrastructure Project’s ratio of 0.56x is below its peer average of 13.58x, which indicates the stock is trading at a lower price compared to the Infrastructure industry. Although, there may be another chance to buy again in the future. This is because Sadbhav Infrastructure Project’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Sadbhav Infrastructure Project generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Sadbhav Infrastructure Project, at least in the near future.
What this means for you:
Are you a shareholder? Although SADBHIN is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to SADBHIN, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on SADBHIN for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
So while earnings quality is important, it’s equally important to consider the risks facing Sadbhav Infrastructure Project at this point in time. To help with this, we’ve discovered 6 warning signs (2 are potentially serious!) that you ought to be aware of before buying any shares in Sadbhav Infrastructure Project.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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