Is It Too Late To Consider Buying Parag Milk Foods Limited (NSE:PARAGMILK)?

While Parag Milk Foods Limited (NSE:PARAGMILK) might not be the most widely known stock at the moment, it led the NSEI gainers with a relatively large price hike in the past couple of weeks. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Parag Milk Foods’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Parag Milk Foods

What is Parag Milk Foods worth?

According to my valuation model, Parag Milk Foods seems to be fairly priced at around 7.9% below my intrinsic value, which means if you buy Parag Milk Foods today, you’d be paying a fair price for it. And if you believe the company’s true value is ₹90.35, then there’s not much of an upside to gain from mispricing. Furthermore, Parag Milk Foods’s low beta implies that the stock is less volatile than the wider market.

Can we expect growth from Parag Milk Foods?

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. 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 revenues expected to grow by a double-digit 23% over the next couple of years, the outlook is positive for Parag Milk Foods. If the level of expenses is able to be maintained, 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? PARAGMILK’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 track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on PARAGMILK, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 3 warning signs for Parag Milk Foods you should be mindful of and 2 of them are a bit concerning.

If you are no longer interested in Parag Milk Foods, you can use our free platform to see our 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 (at) simplywallst.com.

This article by Simply Wall St 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. Simply Wall St has no position in any stocks mentioned.