Why Bajaj Auto Limited (NSE:BAJAJ-AUTO) Could Be Worth Watching

Let's talk about the popular Bajaj Auto Limited (NSE:BAJAJ-AUTO). The company's shares saw its share price hover around a small range of ₹3,668 to ₹3,979 over the last few weeks. But is this actually reflective of the share 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's the opportunity in Bajaj Auto?

Great news for investors – Bajaj Auto is still trading at a fairly cheap price according to my price multiple model, where I compare 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 16.79x is currently well-below the industry average of 34.85x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Bajaj Auto’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

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. 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. However, with a relatively muted profit growth of 2.8% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Bajaj Auto, at least in the short term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since BAJAJ-AUTO is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. However, there are also other factors such as financial health 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 enter the stock. Its 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 strength of its balance sheet, in order to make a well-informed assessment.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 1 warning sign for Bajaj Auto you should be aware of.

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.

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.

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