Should You Think About Buying Prince Pipes and Fittings Limited (NSE:PRINCEPIPE) Now?

Prince Pipes and Fittings Limited (NSE:PRINCEPIPE), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NSEI over the last few months, increasing to ₹736 at one point, and dropping to the lows of ₹607. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Prince Pipes and Fittings' current trading price of ₹627 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Prince Pipes and Fittings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Prince Pipes and Fittings

Is Prince Pipes and Fittings still cheap?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 26.82x is currently trading slightly below its industry peers’ ratio of 27.24x, which means if you buy Prince Pipes and Fittings today, you’d be paying a reasonable price for it. And if you believe that Prince Pipes and Fittings should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because Prince Pipes and Fittings’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Prince Pipes and Fittings 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. With profit expected to grow by a double-digit 15% over the next couple of years, the outlook is positive for Prince Pipes and Fittings. 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? PRINCEPIPE’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 financial strength of the company. Have these factors changed since the last time you looked at PRINCEPIPE? 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 an eye on PRINCEPIPE, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for PRINCEPIPE, 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.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. You'd be interested to know, that we found 1 warning sign for Prince Pipes and Fittings and you'll want to know about this.

If you are no longer interested in Prince Pipes and Fittings, 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.