What Does Maruti Suzuki India Limited's (NSE:MARUTI) Share Price Indicate?

Let's talk about the popular Maruti Suzuki India Limited (NSEI:MARUTI). The company's shares saw a decent share price growth in the teens level on the NSEI over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Maruti Suzuki India’s outlook and valuation to see if the opportunity still exists. See our latest analysis for Maruti Suzuki India

What is Maruti Suzuki India worth?

According to my relative valuation model, the stock is currently overvalued. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Maruti Suzuki India’s ratio of 36.31x is above its peer average of 23.22x, which suggests the stock is overvalued compared to the Auto industry. Another thing to keep in mind is that Maruti Suzuki India’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What kind of growth will Maruti Suzuki India 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. 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. Maruti Suzuki India’s earnings over the next few years are expected to increase by 62.45%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in MARUTI’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe MARUTI should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 positive outlook is encouraging for MARUTI, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Maruti Suzuki India. You can find everything you need to know about Maruti Suzuki India in the latest infographic research report. If you are no longer interested in Maruti Suzuki India, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.