Why Johnson Controls - Hitachi Air Conditioning India Limited (NSE:JCHAC) Could Be A Buy

Johnson Controls - Hitachi Air Conditioning India Limited (NSE:JCHAC), a consumer durables company based in India, received a lot of attention from a substantial price movement on the NSEI over the last few months, increasing to ₹2704.8 at one point, and dropping to the lows of ₹2405. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Johnson Controls - Hitachi Air Conditioning India's current trading price of ₹2405 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Johnson Controls - Hitachi Air Conditioning India’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View out our latest analysis for Johnson Controls - Hitachi Air Conditioning India

What is Johnson Controls - Hitachi Air Conditioning India worth?

Johnson Controls - Hitachi Air Conditioning India appears to be overvalued according to my relative valuation model. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Johnson Controls - Hitachi Air Conditioning India’s ratio of 65.46x is above its peer average of 33.78x, which suggests the stock is overvalued compared to the Consumer Durables industry. Another thing to keep in mind is that Johnson Controls - Hitachi Air Conditioning India’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 its intrinsic value 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 to fall back down into an attractive buying range again.

Can we expect growth from Johnson Controls - Hitachi Air Conditioning India?

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. With profit expected to more than double over the next couple of years, the future seems bright for Johnson Controls - Hitachi Air Conditioning India. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in JCHAC’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe JCHAC should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 tabs on JCHAC for some time, 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 optimistic prospect is encouraging for JCHAC, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Johnson Controls - Hitachi Air Conditioning India. You can find everything you need to know about Johnson Controls - Hitachi Air Conditioning India in the latest infographic research report. If you are no longer interested in Johnson Controls - Hitachi Air Conditioning India, you can use our free platform to see my 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@simplywallst.com

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.