At ₹838, Is It Time To Put Amara Raja Energy & Mobility Limited (NSE:ARE&M) On Your Watch List?

Amara Raja Energy & Mobility Limited (NSE:ARE&M), is not the largest company out there, but it saw a significant share price rise of 39% in the past couple of months on the NSEI. The recent jump in the share price has meant that the company is trading at close to its 52-week high. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Amara Raja Energy & Mobility’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Amara Raja Energy & Mobility

Is Amara Raja Energy & Mobility Still Cheap?

Good news, investors! Amara Raja Energy & Mobility is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 18.35x is currently well-below the industry average of 39.3x, meaning that it is trading at a cheaper price relative to its peers. Another thing to keep in mind is that Amara Raja Energy & Mobility’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.

What kind of growth will Amara Raja Energy & Mobility generate?

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. 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 21% over the next couple of years, the future seems bright for Amara Raja Energy & Mobility. 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 ARE&M 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 ARE&M for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ARE&M. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. At Simply Wall St, we found 1 warning sign for Amara Raja Energy & Mobility and we think they deserve your attention.

If you are no longer interested in Amara Raja Energy & Mobility, 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.