Growth expectations for Capital First Limited (NSEI:CAPF) are high, but many investors are starting to ask whether its last close at ₹586 can still be rationalized by the future potential. Below I will be talking through a basic metric which will help answer this question. See our latest analysis for Capital First
What can we expect from CAPF in the future?Capital First’s growth potential is very attractive. Expectations from 7 analysts are extremely positive with earnings forecasted to rise significantly from today’s level of ₹33.432 to ₹78.939 over the next three years. On average, this leads to a growth rate of 24.97% each year, which signals a market-beating outlook in the upcoming years.
Is CAPF’s share price justifiable by its earnings growth?
CAPF is available at a PE (price-to-earnings) ratio of 17.54x today, which tells us the stock is undervalued based on its latest annual earnings update compared to the consumer finance average of 25.72x , and undervalued relative to the current IN market average of 24.37x .
Given that CAPF’s price-to-earnings of 17.54x lies below the industry average, this already indicates that the company could be potentially undervalued. However, seeing as Capital First is perceived as a high-growth stock, we must also account for its earnings growth, which is captured in the PEG ratio. A PE ratio of 17.54x and expected year-on-year earnings growth of 24.97% give Capital First a very low PEG ratio of 0.7x. This means that, when we account for Capital First’s growth, the stock can be viewed as relatively cheap , based on fundamental analysis.
What this means for you:
CAPF’s current undervaluation could signal a potential buying opportunity to increase your exposure to the stock, or it you’re a potential investor, now may be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:
- Financial Health: Is CAPF’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Past Track Record: Has CAPF been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of CAPF’s historicals for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.