Should You Think About Buying The Phoenix Mills Limited (NSE:PHOENIXLTD) Now?

The Phoenix Mills Limited (NSE:PHOENIXLTD), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NSEI over the last few months, increasing to ₹725 at one point, and dropping to the lows of ₹548. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Phoenix Mills' current trading price of ₹555 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Phoenix Mills’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Phoenix Mills

What is Phoenix Mills worth?

Phoenix Mills appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 Phoenix Mills’s ratio of 52.29x is above its peer average of 14.58x, which suggests the stock is trading at a higher price compared to the Real Estate industry. Another thing to keep in mind is that Phoenix Mills’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.

What kind of growth will Phoenix Mills 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. 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. Phoenix Mills' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? PHOENIXLTD’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe PHOENIXLTD should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 PHOENIXLTD 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 optimistic prospect is encouraging for PHOENIXLTD, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Phoenix Mills as a business, it's important to be aware of any risks it's facing. To help with this, we've discovered 5 warning signs (1 is a bit unpleasant!) that you ought to be aware of before buying any shares in Phoenix Mills.

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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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