Should You Investigate Amara Raja Batteries Limited (NSE:AMARAJABAT) At ₹681?

Amara Raja Batteries Limited (NSE:AMARAJABAT), 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. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Amara Raja Batteries’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Amara Raja Batteries

Is Amara Raja Batteries Still Cheap?

Great news for investors – Amara Raja Batteries is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 Amara Raja Batteries’s ratio of 16.76x is below its peer average of 27.26x, which indicates the stock is trading at a lower price compared to the Electrical industry. Another thing to keep in mind is that Amara Raja Batteries’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

Can we expect growth from Amara Raja Batteries?

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 29% over the next couple of years, the future seems bright for Amara Raja Batteries. 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? Since AMARAJABAT is currently below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on AMARAJABAT for a while, now might be the time to enter the stock. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy AMARAJABAT. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.

So while earnings quality is important, it's equally important to consider the risks facing Amara Raja Batteries at this point in time. Every company has risks, and we've spotted 1 warning sign for Amara Raja Batteries you should know about.

If you are no longer interested in Amara Raja Batteries, 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.