Edelweiss Financial Services Limited (NSE:EDELWEISS), a capital markets company based in India, saw significant share price volatility over the past couple of months on the NSEI, rising to the highs of ₹339.2 and falling to the lows of ₹274.55. 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 Edelweiss Financial Services’s current trading price of ₹297.55 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Edelweiss Financial Services’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Edelweiss Financial Services worth?Edelweiss Financial Services 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 Edelweiss Financial Services’s ratio of 27.74x is above its peer average of 18.33x, which suggests the stock is overvalued compared to the Capital Markets industry. But, is there another opportunity to buy low in the future? Since Edelweiss Financial Services’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Edelweiss Financial Services?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. With profit expected to grow by 70.88% over the next couple of years, the future seems bright for Edelweiss Financial Services. It looks like higher cash flow 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 EDELWEISS’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe EDELWEISS 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 an eye on EDELWEISS for a while, 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 EDELWEISS, 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 Edelweiss Financial Services. You can find everything you need to know about Edelweiss Financial Services in the latest infographic research report. If you are no longer interested in Edelweiss Financial Services, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.