At ₹156, Is It Time To Put Rail Vikas Nigam Limited (NSE:RVNL) On Your Watch List?

While Rail Vikas Nigam Limited (NSE:RVNL) might not be the most widely known stock at the moment, it led the NSEI gainers with a relatively large price hike in the past couple of weeks. As a ₹326b market-cap stock, it seems odd Rail Vikas Nigam is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Let’s take a look at Rail Vikas Nigam’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Rail Vikas Nigam

What Is Rail Vikas Nigam Worth?

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 22.21x is currently trading in-line with its industry peers’ ratio, which means if you buy Rail Vikas Nigam today, you’d be paying a relatively reasonable price for it. Is there another opportunity to buy low in the future? Since Rail Vikas Nigam’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 does the future of Rail Vikas Nigam look like?

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 Rail Vikas Nigam, it is expected to deliver a negative earnings growth of -8.1%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? RVNL seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on RVNL, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on RVNL for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on RVNL should the price fluctuate below the industry PE ratio.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To help with this, we've discovered 4 warning signs (2 make us uncomfortable!) that you ought to be aware of before buying any shares in Rail Vikas Nigam.

If you are no longer interested in Rail Vikas Nigam, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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

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.