At ₹46.05, Is It Time To Put NBCC (India) Limited (NSE:NBCC) On Your Watch List?

While NBCC (India) Limited (NSE:NBCC) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the NSEI over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on NBCC (India)’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for NBCC (India)

What's the opportunity in NBCC (India)?

NBCC (India) 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 NBCC (India)’s ratio of 29.51x is above its peer average of 18.88x, 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 NBCC (India)’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 kind of growth will NBCC (India) generate?

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. Though in the case of NBCC (India), it is expected to deliver a relatively unexciting earnings growth of 6.2%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for NBCC (India), at least in the near term.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in NBCC’s outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe NBCC 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 NBCC 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 positive growth outlook may mean it’s worth diving deeper into other factors 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. For example - NBCC (India) has 1 warning sign we think you should be aware of.

If you are no longer interested in NBCC (India), 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.