Punjab National Bank (NSEI:PNB), operating in the financial services industry based in India, saw a significant share price rise of over 20% in the past couple of months on the NSEI. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Punjab National Bank’s outlook and value based on the most recent financial data to see if the opportunity still exists. View our latest analysis for Punjab National Bank
What is Punjab National Bank worth?Punjab National Bank appears to be overvalued according to my relative valuation model. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Punjab National Bank’s ratio of 30.45x is above its peer average of 20.3x, which suggests the stock is overvalued compared to the banks industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Punjab National Bank’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.
What does the future of Punjab National Bank look like?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 more than double over the next couple of years, the future seems bright for Punjab National Bank. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? Punjab National Bank’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe Punjab National Bank should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 Punjab National Bank 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 positive outlook is encouraging for Punjab National Bank, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Punjab National Bank. You can find everything you need to know about Punjab National Bank in the latest infographic research report. If you are no longer interested in Punjab National Bank, you can use our free platform to see my list of over 50 other stocks with a high growth potential.