Does Indiabulls Housing Finance Limited's (NSE:IBULHSGFIN) July Stock Price Reflect Its Future Growth?
Looking at Indiabulls Housing Finance Limited’s (NSE:IBULHSGFIN) fundamentals some investors are wondering if its last closing price of ₹1258.2 represents a good value for money for this high growth stock. Let’s look into this by assessing IBULHSGFIN's expected growth over the next few years.
View our latest analysis for Indiabulls Housing Finance
Where's the growth?
Indiabulls Housing Finance is poised for significantly high earnings growth in the near future. Expectations from 11 analysts are extremely bullish with earnings per share estimated to rise from today's level of ₹90.51 to ₹156.336 over the next three years. This indicates an estimated earnings growth rate of 20.03% per year, on average, which indicates an exceedlingly positive future in the near term.
Is IBULHSGFIN's share price justified by its earnings growth?
Indiabulls Housing Finance is trading at quite low price-to-earnings (PE) ratio of 13.9x. This tells us the stock is undervalued relative to the current IN market average of 20.83x , and undervalued based on its latest annual earnings update compared to the mortgage average of 19.72x . This multiple is a median of profitable companies of 11 Mortgage companies in IN including Pacheli Industrial Finance, GIC Housing Finance and GIC Housing Finance.
Given that IBULHSGFIN's price-to-earnings of 13.9x lies below the industry average, this already indicates that the company could be potentially undervalued. But, to properly examine the value of a high-growth stock such as Indiabulls Housing Finance, 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 13.9x and expected year-on-year earnings growth of 20.03% give Indiabulls Housing Finance a very low PEG ratio of 0.69x. This tells us that when we include its growth in our analysis Indiabulls Housing Finance's stock can be considered relatively cheap , based on fundamental analysis.
What this means for you:
IBULHSGFIN's current undervaluation could signal a potential buying opportunity to increase your exposure to the stock, or it you're a potential investor, now may 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 urge you to complete your research by taking a look at the following:
- Financial Health: Is IBULHSGFIN’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 IBULHSGFIN 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 IBULHSGFIN'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.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.