Why IRB Infrastructure Developers Limited (NSE:IRB) Could Be Worth Watching

By
Simply Wall St
Published
November 16, 2021
NSEI:IRB
Source: Shutterstock

IRB Infrastructure Developers Limited (NSE:IRB), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the NSEI. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on IRB Infrastructure Developers’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for IRB Infrastructure Developers

What is IRB Infrastructure Developers worth?

IRB Infrastructure Developers is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to 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 27.36x is above its peer average of 17.92x, 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? Given that IRB Infrastructure Developers’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of IRB Infrastructure Developers look like?

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NSEI:IRB Earnings and Revenue Growth November 17th 2021

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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.

So while earnings quality is important, it's equally important to consider the risks facing IRB Infrastructure Developers at this point in time. For instance, we've identified 3 warning signs for IRB Infrastructure Developers (1 doesn't sit too well with us) you should be familiar with.

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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