Is IRB Infrastructure Developers Limited (NSE:IRB) Potentially Undervalued?

While IRB Infrastructure Developers Limited (NSE:IRB) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the NSEI, rising to highs of ₹300 and falling to the lows of ₹197. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether IRB Infrastructure Developers' current trading price of ₹197 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at IRB Infrastructure Developers’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for IRB Infrastructure Developers

Is IRB Infrastructure Developers still cheap?

IRB Infrastructure Developers appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 IRB Infrastructure Developers’s ratio of 41.86x is above its peer average of 17.2x, which suggests the stock is trading at a higher price compared to the Construction industry. But, is there another opportunity to buy low in the future? Since IRB Infrastructure Developers’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of IRB Infrastructure Developers look like?

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. IRB Infrastructure Developers' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? IRB’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe IRB should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on IRB for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for IRB, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about IRB Infrastructure Developers as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 4 warning signs for IRB Infrastructure Developers (of which 2 don't sit too well with us!) you should know about.

If you are no longer interested in IRB Infrastructure Developers, 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.