Is It Time To Consider Buying Indo Count Industries Limited (NSE:ICIL)?

Indo Count Industries Limited (NSE:ICIL), is not the largest company out there, 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 take a look at Indo Count Industries’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Indo Count Industries

What Is Indo Count Industries 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 11.68x is currently trading slightly below its industry peers’ ratio of 16.26x, which means if you buy Indo Count Industries today, you’d be paying a decent price for it. And if you believe that Indo Count Industries should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, Indo Count Industries’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

Can we expect growth from Indo Count Industries?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 negative profit growth of -5.2% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Indo Count Industries. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Currently, ICIL appears to be trading around industry price multiples, 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 optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on ICIL, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on ICIL for a while, now may not be the most optimal 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 crystallize your views on ICIL should the price fluctuate below the industry PE ratio.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To that end, you should learn about the 2 warning signs we've spotted with Indo Count Industries (including 1 which is significant).

If you are no longer interested in Indo Count Industries, 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.