At ₹9,042, Is Bajaj Auto Limited (NSE:BAJAJ-AUTO) Worth Looking At Closely?

Let's talk about the popular Bajaj Auto Limited (NSE:BAJAJ-AUTO). The company's shares led the NSEI gainers with a relatively large price hike in the past couple of weeks. The recent jump in the share price has meant that the company is trading at close to its 52-week high. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Bajaj Auto’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Bajaj Auto

Is Bajaj Auto Still Cheap?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Bajaj Auto’s ratio of 34.11x is trading slightly above its industry peers’ ratio of 33.53x, which means if you buy Bajaj Auto today, you’d be paying a relatively sensible price for it. And if you believe that Bajaj Auto should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, Bajaj Auto’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

Can we expect growth from Bajaj Auto?

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. Bajaj Auto's earnings over the next few years are expected to increase by 58%, 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? BAJAJ-AUTO’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. 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 BAJAJ-AUTO? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on BAJAJ-AUTO, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for BAJAJ-AUTO, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Bajaj Auto, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for Bajaj Auto and we think they deserve your attention.

If you are no longer interested in Bajaj Auto, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.