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

IRB Infrastructure Developers Limited (NSE:IRB), might not be a large cap stock, 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. But what if there is still an opportunity to buy? Today I will analyse the most recent data on IRB Infrastructure Developers’s outlook and valuation to see if the opportunity still exists.

Our analysis indicates that IRB is potentially undervalued!

Is IRB Infrastructure Developers Still Cheap?

According to my valuation model, IRB Infrastructure Developers seems to be fairly priced at around 3.5% below my intrinsic value, which means if you buy IRB Infrastructure Developers today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth ₹270.25, then there’s not much of an upside to gain from mispricing. So, is there another chance 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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from IRB Infrastructure Developers?

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 increase by 34%, 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? IRB’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on IRB, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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.

So while earnings quality is important, it's equally important to consider the risks facing IRB Infrastructure Developers at this point in time. Be aware that IRB Infrastructure Developers is showing 3 warning signs in our investment analysis and 2 of those are potentially serious...

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.