Is Triveni Turbine Limited (NSE:TRITURBINE) Potentially Undervalued?

By
Simply Wall St
Published
March 23, 2022
NSEI:TRITURBINE
Source: Shutterstock

Triveni Turbine Limited (NSE:TRITURBINE), is not the largest company out there, but it saw a decent share price growth in the teens level on the NSEI over the last few months. As a small cap stock, which tends to lack high analyst coverage, 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 Triveni Turbine’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Triveni Turbine

What's the opportunity in Triveni Turbine?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 23.91x is currently well-above the industry average of 18.16x, meaning that it is trading at a more expensive price relative to its peers. Another thing to keep in mind is that Triveni Turbine’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.

Can we expect growth from Triveni Turbine?

earnings-and-revenue-growth
NSEI:TRITURBINE Earnings and Revenue Growth March 23rd 2022

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. However, with a relatively muted profit growth of 3.7% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Triveni Turbine, at least in the short term.

What this means for you:

Are you a shareholder? TRITURBINE’s future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe TRITURBINE 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 TRITURBINE 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. Case in point: We've spotted 2 warning signs for Triveni Turbine you should be aware of.

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

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