Should You Think About Buying Balkrishna Industries Limited (NSE:BALKRISIND) Now?

Balkrishna Industries Limited (NSE:BALKRISIND), is not the largest company out there, but it saw significant share price movement during recent months on the NSEI, rising to highs of ₹2,910 and falling to the lows of ₹2,497. 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 Balkrishna Industries' current trading price of ₹2,544 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Balkrishna Industries’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 Balkrishna Industries

What's The Opportunity In Balkrishna Industries?

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. 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 Balkrishna Industries’s ratio of 27.76x is trading slightly above its industry peers’ ratio of 26.8x, which means if you buy Balkrishna Industries today, you’d be paying a relatively reasonable price for it. And if you believe that Balkrishna Industries should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. In addition to this, it seems like Balkrishna Industries’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Balkrishna Industries generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 27% over the next couple of years, the future seems bright for Balkrishna Industries. 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? BALKRISIND’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 BALKRISIND? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on BALKRISIND, 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 BALKRISIND, 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 Balkrishna Industries, you'd also look into what risks it is currently facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Balkrishna Industries.

If you are no longer interested in Balkrishna Industries, 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.