Is It Too Late To Consider Buying Suprajit Engineering Limited (NSE:SUPRAJIT)?

While Suprajit Engineering Limited (NSE:SUPRAJIT) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the NSEI. With many analysts covering the 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 Suprajit Engineering’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Suprajit Engineering

What's the opportunity in Suprajit Engineering?

Suprajit Engineering is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to 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 Suprajit Engineering’s ratio of 45.56x is above its peer average of 33.67x, which suggests the stock is trading at a higher price compared to the Auto Components industry. In addition to this, it seems like Suprajit Engineering’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 Suprajit Engineering?

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. Suprajit Engineering's 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 SUPRAJIT’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 SUPRAJIT 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 SUPRAJIT 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 SUPRAJIT, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Suprajit Engineering, you'd also look into what risks it is currently facing. At Simply Wall St, we found 2 warning signs for Suprajit Engineering and we think they deserve your attention.

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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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