Today we’re going to take a look at the well-established State Bank of India (NSEI:SBIN). The company’s stock saw a double-digit share price rise of over 10% in the past couple of months on the NSEI. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on State Bank of India’s outlook and valuation to see if the opportunity still exists. View our latest analysis for State Bank of India
Is State Bank of India still cheap?According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that State Bank of India’s ratio of 1x is trading slightly above its industry peers’ ratio of 0.69x, which means if you buy State Bank of India today, you’d be paying a relatively fair price for it. And if you believe State Bank of India should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that State Bank of India’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from State Bank of India?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. With revenue expected to more than double in the next few years, the future appears to be extremely bright for State Bank of India. If expenses can also be maintained, 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? SBIN’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at SBIN? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on SBIN, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for SBIN, 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on State Bank of India. You can find everything you need to know about State Bank of India in the latest infographic research report. If you are no longer interested in State Bank of India, you can use our free platform to see my list of over 50 other stocks with a high growth potential.