Why HPL Electric & Power Limited (NSE:HPL) Could Be Worth Watching

HPL Electric & Power Limited (NSE:HPL), is not the largest company out there, but it saw a decent share price growth of 13% on the NSEI over the last few months. While good news for shareholders, the company has traded much higher in the past year. 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? Today we will analyse the most recent data on HPL Electric & Power’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for HPL Electric & Power

What Is HPL Electric & Power Worth?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 HPL Electric & Power’s ratio of 36.96x is trading slightly above its industry peers’ ratio of 35.42x, which means if you buy HPL Electric & Power today, you’d be paying a relatively sensible price for it. And if you believe HPL Electric & Power should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like HPL Electric & Power’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from HPL Electric & Power?

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. HPL Electric & Power's earnings over the next few years are expected to increase by 89%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? HPL’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. 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 HPL? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on HPL, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for HPL, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about HPL Electric & Power as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for HPL Electric & Power and we think they deserve your attention.

If you are no longer interested in HPL Electric & Power, 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.