Is Now The Time To Look At Buying The Indian Hume Pipe Company Limited (NSE:INDIANHUME)?

While The Indian Hume Pipe Company Limited (NSE:INDIANHUME) might not have the largest market cap around , it saw a decent share price growth of 16% on the NSEI over the last few months. While good news for shareholders, the company has traded much higher in the past year. 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 take a look at Indian Hume Pipe’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Indian Hume Pipe

Is Indian Hume Pipe Still Cheap?

Great news for investors – Indian Hume Pipe 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 Indian Hume Pipe’s ratio of 17.61x is below its peer average of 25.07x, which indicates the stock is trading at a lower price compared to the Construction industry. Although, there may be another chance to buy again in the future. This is because Indian Hume Pipe’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Indian Hume Pipe look like?

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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Indian Hume Pipe, at least in the near future.

What This Means For You

Are you a shareholder? Although INDIANHUME 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 INDIANHUME, 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 tabs on INDIANHUME for some time, 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.

So while earnings quality is important, it's equally important to consider the risks facing Indian Hume Pipe at this point in time. Case in point: We've spotted 3 warning signs for Indian Hume Pipe you should be mindful of and 2 of these make us uncomfortable.

If you are no longer interested in Indian Hume Pipe, 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.