Stock Analysis

What Is Mahindra & Mahindra Limited's (NSE:M&M) Share Price Doing?

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NSEI:M&M
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Mahindra & Mahindra Limited (NSE:M&M) saw a decent share price growth in the teens level on the NSEI over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Mahindra & Mahindra’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Mahindra & Mahindra

Is Mahindra & Mahindra still cheap?

Great news for investors – Mahindra & Mahindra 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. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Mahindra & Mahindra’s ratio of 14.4x is below its peer average of 32.02x, which indicates the stock is trading at a lower price compared to the Auto industry. Although, there may be another chance to buy again in the future. This is because Mahindra & Mahindra’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 Mahindra & Mahindra generate?

earnings-and-revenue-growth
NSEI:M&M Earnings and Revenue Growth March 27th 2022

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

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since M&M 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 capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on M&M 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 M&M. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 3 warning signs for Mahindra & Mahindra you should be mindful of and 1 of these can't be ignored.

If you are no longer interested in Mahindra & Mahindra, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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About NSEI:M&M

Mahindra & Mahindra

Mahindra & Mahindra Limited provides mobility products and farm solutions in India and internationally.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation2
Future Growth0
Past Performance4
Financial Health3
Dividends3

Read more about these checks in the individual report sections or in our analysis model.

Proven track record with mediocre balance sheet.