Is Now The Time To Look At Buying Action Construction Equipment Limited (NSE:ACE)?

Action Construction Equipment Limited (NSE:ACE), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NSEI over the last few months. The recent jump in the share price has meant that the company is trading at close to its 52-week high. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Action Construction Equipment’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Action Construction Equipment

What Is Action Construction Equipment Worth?

According to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Action Construction Equipment’s ratio of 47.17x is above its peer average of 34.45x, which suggests the stock is trading at a higher price compared to the Machinery industry. But, is there another opportunity to buy low in the future? Since Action Construction Equipment’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Action Construction Equipment generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 profit expected to grow by a double-digit 20% in the upcoming year, the short-term outlook is positive for Action Construction Equipment. 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 well and truly priced in ACE’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 ACE 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 an eye on ACE for a while, 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 ACE, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Diving deeper into the forecasts for Action Construction Equipment mentioned earlier will help you understand how analysts view the stock going forward. Luckily, you can check out what analysts are forecasting by clicking here.

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

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This article by Simply Wall St 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. Simply Wall St has no position in any stocks mentioned.