Is Now An Opportune Moment To Examine Sundram Fasteners Limited (NSE:SUNDRMFAST)?

Sundram Fasteners Limited (NSE:SUNDRMFAST), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the NSEI. As a well-established company, which tends to be well-covered 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 take a look at Sundram Fasteners’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Sundram Fasteners

What's the opportunity in Sundram Fasteners?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 45.09x is above its peer average of 31.41x, which suggests the stock is trading at a higher price compared to the Auto Components industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Sundram Fasteners’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

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 double, indicating a very optimistic future ahead. This should lead to stronger 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Sundram Fasteners has 1 warning sign we think you should be aware of.

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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. 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.
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