Is Now The Time To Look At Buying JK Tyre & Industries Limited (NSE:JKTYRE)?

While JK Tyre & Industries Limited (NSE:JKTYRE) might not be the most widely known stock at the moment, it led the NSEI gainers with a relatively large price hike in the past couple of weeks. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine JK Tyre & Industries’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for JK Tyre & Industries

What is JK Tyre & Industries worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 5.0% below my intrinsic value, which means if you buy JK Tyre & Industries today, you’d be paying a fair price for it. And if you believe that the stock is really worth ₹84.78, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because JK Tyre & Industries’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will JK Tyre & Industries generate?

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. With revenues expected to grow by 41% over the next couple of years, the future seems bright for JK Tyre & Industries. If the level of expenses is able to be maintained, 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? It seems like the market has already priced in JKTYRE’s positive outlook, with shares trading around its fair value. 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 the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on JKTYRE, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. When we did our research, we found 3 warning signs for JK Tyre & Industries (1 doesn't sit too well with us!) that we believe deserve your full attention.

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This article by Simply Wall St is general in nature. 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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