Is Now An Opportune Moment To Examine Rail Vikas Nigam Limited (NSE:RVNL)?

Rail Vikas Nigam Limited (NSE:RVNL), might not be a large cap stock, but it led the NSEI gainers with a relatively large price hike in the past couple of weeks. 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? Let’s examine Rail Vikas Nigam’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Rail Vikas Nigam

What Is Rail Vikas Nigam Worth?

Great news for investors – Rail Vikas Nigam is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 11.86x is currently well-below the industry average of 19.34x, meaning that it is trading at a cheaper price relative to its peers. However, given that Rail Vikas Nigam’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Rail Vikas Nigam generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted profit growth of 5.0% expected over the next year, growth doesn’t seem like a key driver for a buy decision for Rail Vikas Nigam, at least in the short term.

What This Means For You

Are you a shareholder? Even though growth is relatively muted, since RVNL is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on RVNL for a while, now might be the time to enter the stock. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy RVNL. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.

If you'd like to know more about Rail Vikas Nigam as a business, it's important to be aware of any risks it's facing. Our analysis shows 3 warning signs for Rail Vikas Nigam (1 is concerning!) and we strongly recommend you look at them before investing.

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.

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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.