Should You Think About Buying JTEKT India Limited (NSE:JTEKTINDIA) Now?

JTEKT India Limited (NSE:JTEKTINDIA), might not be a large cap stock, but it led the NSEI gainers with a relatively large price hike in the past couple of weeks. The company is now trading at yearly-high levels following the recent surge in its share price. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today we will analyse the most recent data on JTEKT India’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for JTEKT India

What Is JTEKT India Worth?

JTEKT India is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison 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 JTEKT India’s ratio of 50.03x is above its peer average of 31.25x, which suggests the stock is trading at a higher price compared to the Auto Components industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since JTEKT India’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from JTEKT India?

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 55% over the next couple of years, the future seems bright for JTEKT India. 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? JTEKTINDIA’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe JTEKTINDIA should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on JTEKTINDIA for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for JTEKTINDIA, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into JTEKT India, you'd also look into what risks it is currently facing. While conducting our analysis, we found that JTEKT India has 1 warning sign and it would be unwise to ignore it.

If you are no longer interested in JTEKT India, 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.