At ₹8,403, Is Maruti Suzuki India Limited (NSE:MARUTI) Worth Looking At Closely?

Today we're going to take a look at the well-established Maruti Suzuki India Limited (NSE:MARUTI). The company's stock saw a decent share price growth in the teens level on the NSEI over the last few months. As a large-cap stock, it seems odd Maruti Suzuki India is not more well-covered by analysts. Although, there is more of an opportunity for mispricing in stocks with low coverage, 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 Maruti Suzuki India’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Maruti Suzuki India

What's the opportunity in Maruti Suzuki India?

Maruti Suzuki India appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. I’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 65.43x is currently well-above the industry average of 32.47x, meaning that it is trading at a more expensive price relative to its peers. In addition to this, it seems like Maruti Suzuki India’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Maruti Suzuki 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. 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 profit expected to more than double over the next couple of years, the future seems bright for Maruti Suzuki 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? MARUTI’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 MARUTI 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 MARUTI 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 MARUTI, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 1 warning sign for Maruti Suzuki India you should know about.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.