Edelweiss Financial Services Limited (NSEI: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 ₹297 and falling to the lows of ₹248.95. 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 ₹273.2 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. See our latest analysis for Edelweiss Financial Services
What’s the opportunity in Edelweiss Financial Services?According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 28.69x is currently trading slightly above its industry peers’ ratio of 24.49x, which means if you buy Edelweiss Financial Services today, you’d be paying a relatively fair price for it. And if you believe that Edelweiss Financial Services should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that Edelweiss Financial Services’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Edelweiss Financial Services look like?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. Edelweiss Financial Services’s earnings over the next few years are expected to increase by 81.51%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? EDELWEISS’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at EDELWEISS? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on EDELWEISS, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for EDELWEISS, which means it’s worth further examining other factors such as the strength of its balance sheet, 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.