Should You Investigate Kirloskar Oil Engines Limited (NSE:KIRLOSENG) At ₹1,349?

While Kirloskar Oil Engines Limited (NSE:KIRLOSENG) might not have the largest market cap around , it saw a significant share price rise of 56% in the past couple of months on the NSEI. The recent share price gains has brought the company back closer to its yearly peak. With many analysts covering the mid-cap 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? Let’s examine Kirloskar Oil Engines’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Kirloskar Oil Engines

What Is Kirloskar Oil Engines Worth?

The share price seems sensible at the moment 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 Kirloskar Oil Engines’s ratio of 44.29x is trading slightly above its industry peers’ ratio of 39.5x, which means if you buy Kirloskar Oil Engines today, you’d be paying a relatively sensible price for it. And if you believe Kirloskar Oil Engines should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. In addition to this, it seems like Kirloskar Oil Engines’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Kirloskar Oil Engines?

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. Kirloskar Oil Engines' earnings over the next few years are expected to increase by 63%, 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? KIRLOSENG’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. 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 KIRLOSENG? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on KIRLOSENG, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for KIRLOSENG, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 3 warning signs for Kirloskar Oil Engines you should be mindful of and 2 of these are significant.

If you are no longer interested in Kirloskar Oil Engines, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com