Is Minda Industries Limited (NSE:MINDAIND) Undervalued After Accounting For Its Future Growth?
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Minda Industries Limited (NSE:MINDAIND) is considered a high growth stock. However its last closing price of ₹318.25 left investors wondering whether this growth has already been factored into the share price. Let’s take a look at some key metrics to determine whether there's any value here for current and potential future investors.
Check out our latest analysis for Minda Industries
Why you should get excited about MINDAIND future
The excitement around Minda Industries's growth potential is not unfounded. Expectations from 7 analysts are extremely positive with earnings per share estimated to surge from current levels of ₹10.9 to ₹20.989 over the next three years. This indicates an estimated earnings growth rate of 21% per year, on average, which illustrates a highly optimistic outlook in the near term.
Can MINDAIND's share price be justified by its earnings growth?
MINDAIND is trading at price-to-earnings (PE) ratio of 29.16x, which suggests that Minda Industries is overvalued based on current earnings compared to the Auto Components industry average of 14.91x , and overvalued compared to the IN market average ratio of 15.34x .
We already know that MINDAIND appears to be overvalued when compared to its industry average. However, to properly examine the value of a high-growth stock such as Minda Industries, we must reflect its earnings growth into the valuation. I find that the PEG ratio is simple yet effective for this exercise. A PE ratio of 29.16x and expected year-on-year earnings growth of 21% give Minda Industries a higher PEG ratio of 1.42x. Based on this growth, Minda Industries's stock can be considered slightly overvalued , based on its fundamentals.
What this means for you:
MINDAIND's current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you're a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:
- Financial Health: Are MINDAIND’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Past Track Record: Has MINDAIND been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of MINDAIND's historicals for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.