At ₹834, Is Sundram Fasteners Limited (NSE:SUNDRMFAST) Worth Looking At Closely?

Sundram Fasteners Limited (NSE:SUNDRMFAST), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NSEI over the last few months, increasing to ₹913 at one point, and dropping to the lows of ₹792. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Sundram Fasteners' current trading price of ₹834 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Sundram Fasteners’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Sundram Fasteners

What's the opportunity in Sundram Fasteners?

Sundram Fasteners 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. 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 Sundram Fasteners’s ratio of 33.36x is above its peer average of 21.47x, which suggests the stock is trading at a higher price compared to the Auto Components industry. In addition to this, it seems like Sundram Fasteners’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 Sundram Fasteners?

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. Sundram Fasteners' earnings over the next few years are expected to increase by 72%, 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 SUNDRMFAST’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe SUNDRMFAST 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 an eye on SUNDRMFAST for a while, 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 SUNDRMFAST, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Sundram Fasteners as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 1 warning sign for Sundram Fasteners you should be aware of.

If you are no longer interested in Sundram Fasteners, 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.