Should You Think About Buying Ircon International Limited (NSE:IRCON) Now?

While Ircon International Limited (NSE:IRCON) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the NSEI over the last few months. Less-covered, small caps tend to present 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? Today I will analyse the most recent data on Ircon International’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Ircon International

What Is Ircon International Worth?

Good news, investors! Ircon International is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio 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 Ircon International’s ratio of 16.98x is below its peer average of 23.34x, which indicates the stock is trading at a lower price compared to the Construction industry. What’s more interesting is that, Ircon International’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Ircon International generate?

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 a negative profit growth of -1.6% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Ircon International. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although IRCON is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to IRCON, 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 an eye on IRCON for a while, but hesitant on making the leap, I 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.

If you'd like to know more about Ircon International as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 2 warning signs with Ircon International, and understanding them should be part of your investment process.

If you are no longer interested in Ircon International, 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.