Is NBCC (India) Limited (NSE:NBCC) Potentially Undervalued?

While NBCC (India) Limited (NSE:NBCC) might not have the largest market cap around , it led the NSEI gainers with a relatively large price hike in the past couple of weeks. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. As a well-established company, which tends to be well-covered by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on NBCC (India)’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for NBCC (India)

What Is NBCC (India) Worth?

According to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 NBCC (India)’s ratio of 79.48x is above its peer average of 29.33x, 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.

Can we expect growth from NBCC (India)?

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. With profit expected to grow by 61% over the next couple of years, the future seems bright for NBCC (India). It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in NBCC’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to 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 tabs on NBCC for some time, 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 NBCC, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about NBCC (India) as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that NBCC (India) has 3 warning signs and it would be unwise to ignore these.

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.

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