Is Bajaj Auto Limited (NSE:BAJAJ-AUTO) Potentially Undervalued?

Let's talk about the popular Bajaj Auto Limited (NSE:BAJAJ-AUTO). The company's shares received a lot of attention from a substantial price movement on the NSEI over the last few months, increasing to ₹5,183 at one point, and dropping to the lows of ₹4,584. 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 Bajaj Auto's current trading price of ₹5,001 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Bajaj Auto’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Bajaj Auto

What Is Bajaj Auto Worth?

Good news, investors! Bajaj Auto 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. 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 21.65x is currently well-below the industry average of 30.91x, meaning that it is trading at a cheaper price relative to its peers. Another thing to keep in mind is that Bajaj Auto’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 its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What does the future of Bajaj Auto look like?

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. With profit expected to grow by 22% over the next couple of years, the future seems bright for Bajaj Auto. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? Since BAJAJ-AUTO is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With a positive profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on BAJAJ-AUTO for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy BAJAJ-AUTO. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

If you'd like to know more about Bajaj Auto as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 2 warning signs with Bajaj Auto, and understanding them should be part of your investment process.

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.