Should You Investigate Firstsource Solutions Limited (NSE:FSL) At ₹315?

Firstsource Solutions Limited (NSE:FSL), might not be a large cap stock, but it saw a significant share price rise of 58% in the past couple of months on the NSEI. The company is inching closer to its yearly highs following the recent share price climb. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Firstsource Solutions’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Firstsource Solutions

What's The Opportunity In Firstsource Solutions?

According to our valuation model, Firstsource Solutions seems to be fairly priced at around 10.64% above our intrinsic value, which means if you buy Firstsource Solutions today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is ₹284.40, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that Firstsource Solutions’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Firstsource Solutions?

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. Firstsource Solutions' earnings over the next few years are expected to increase by 89%, 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 FSL’s positive outlook, with shares trading around its fair value. 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 the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on FSL, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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.

If you'd like to know more about Firstsource Solutions as a business, it's important to be aware of any risks it's facing. For example - Firstsource Solutions has 2 warning signs we think you should be aware of.

If you are no longer interested in Firstsource Solutions, 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.