At ₹3,645, Is V.S.T. Tillers Tractors Limited (NSE:VSTTILLERS) Worth Looking At Closely?

V.S.T. Tillers Tractors Limited (NSE:VSTTILLERS), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the NSEI. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. 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 V.S.T. Tillers Tractors’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for V.S.T. Tillers Tractors

What Is V.S.T. Tillers Tractors Worth?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. 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 V.S.T. Tillers Tractors’s ratio of 30.43x is trading slightly above its industry peers’ ratio of 29.44x, which means if you buy V.S.T. Tillers Tractors today, you’d be paying a relatively reasonable price for it. And if you believe that V.S.T. Tillers Tractors should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Although, there may be an opportunity to buy in the future. This is because V.S.T. Tillers Tractors’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.

Can we expect growth from V.S.T. Tillers Tractors?

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. 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. V.S.T. Tillers Tractors' earnings over the next few years are expected to increase by 51%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in VSTTILLERS’s positive outlook, 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 VSTTILLERS? 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 VSTTILLERS, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for VSTTILLERS, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 1 warning sign for V.S.T. Tillers Tractors you should know about.

If you are no longer interested in V.S.T. Tillers Tractors, 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.