Is Now The Time To Look At Buying Kewal Kiran Clothing Limited (NSE:KKCL)?

Kewal Kiran Clothing Limited (NSE:KKCL), might not be a large cap stock, but it saw significant share price movement during recent months on the NSEI, rising to highs of ₹953 and falling to the lows of ₹815. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Kewal Kiran Clothing's current trading price of ₹878 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 Kewal Kiran Clothing’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Kewal Kiran Clothing

Is Kewal Kiran Clothing still cheap?

Kewal Kiran Clothing is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Kewal Kiran Clothing’s ratio of 54.83x is above its peer average of 18.75x, which suggests the stock is trading at a higher price compared to the Luxury industry. In addition to this, it seems like Kewal Kiran Clothing’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Kewal Kiran Clothing look like?

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. Kewal Kiran Clothing's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? KKCL’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe KKCL 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 tabs on KKCL 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 KKCL, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Kewal Kiran Clothing at this point in time. While conducting our analysis, we found that Kewal Kiran Clothing has 2 warning signs and it would be unwise to ignore them.

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This article by Simply Wall St is general in nature. 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.
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