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

Today we're going to take a look at the well-established Bajaj Auto Limited (NSE:BAJAJ-AUTO). The company's stock saw significant share price movement during recent months on the NSEI, rising to highs of ₹9,156 and falling to the lows of ₹7,307. 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 ₹7,837 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.

We've discovered 1 warning sign about Bajaj Auto. View them for free.

What's The Opportunity In Bajaj Auto?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’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 29.05x is currently trading slightly above its industry peers’ ratio of 27.97x, 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.

View our latest analysis for Bajaj Auto

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. Bajaj Auto's earnings over the next few years are expected to increase by 63%, 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 financial strength of the company. 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 positive outlook 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. For example - Bajaj Auto has 1 warning sign we think 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.

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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.