Is Now An Opportune Moment To Examine Elecon Engineering Company Limited (NSE:ELECON)?

Elecon Engineering Company Limited (NSE:ELECON), is not the largest company out there, but it saw a decent share price growth of 12% on the NSEI over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Elecon Engineering’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

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What Is Elecon Engineering Worth?

Great news for investors – Elecon Engineering is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. 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 Elecon Engineering’s ratio of 26.05x is below its peer average of 38.03x, which indicates the stock is trading at a lower price compared to the Electrical industry. What’s more interesting is that, Elecon Engineering’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

Check out our latest analysis for Elecon Engineering

What kind of growth will Elecon Engineering 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. 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. However, with a negative profit growth of -13% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Elecon Engineering. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although ELECON is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. We recommend you think about whether you want to increase your portfolio exposure to ELECON, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on ELECON for a while, but hesitant on making the leap, we recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 1 warning sign for Elecon Engineering you should be aware of.

If you are no longer interested in Elecon Engineering, 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.