Should You Think About Buying TVS Motor Company Limited (NSE:TVSMOTOR) Now?

By
Simply Wall St
Published
November 27, 2021
NSEI:TVSMOTOR
Source: Shutterstock

TVS Motor Company Limited (NSE:TVSMOTOR), is not the largest company out there, but it received a lot of attention from a substantial price increase on the NSEI over the last few months. 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? Today I will analyse the most recent data on TVS Motor’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for TVS Motor

Is TVS Motor still cheap?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 TVS Motor’s ratio of 38.97x is trading slightly above its industry peers’ ratio of 35.86x, which means if you buy TVS Motor today, you’d be paying a relatively reasonable price for it. And if you believe TVS Motor should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. In addition to this, it seems like TVS Motor’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will TVS Motor generate?

earnings-and-revenue-growth
NSEI:TVSMOTOR Earnings and Revenue Growth November 28th 2021

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. With profit expected to grow by 84% over the next couple of years, the future seems bright for TVS Motor. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has already priced in TVSMOTOR’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at TVSMOTOR? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on TVSMOTOR, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for TVSMOTOR, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For instance, we've identified 3 warning signs for TVS Motor (1 is a bit unpleasant) you should be familiar with.

If you are no longer interested in TVS Motor, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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