Is Now The Time To Look At Buying Tata Coffee Limited (NSE:TATACOFFEE)?

Tata Coffee Limited (NSE:TATACOFFEE), is not the largest company out there, but it saw significant share price movement during recent months on the NSEI, rising to highs of ₹118 and falling to the lows of ₹98.40. 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 Tata Coffee's current trading price of ₹103 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 Tata Coffee’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Tata Coffee

What's the opportunity in Tata Coffee?

The stock is currently trading at ₹103 on the share market, which means it is overvalued by 29% compared to my intrinsic value of ₹80.22. This means that the opportunity to buy Tata Coffee at a good price has disappeared!

What kind of growth will Tata Coffee generate?

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. Though in the case of Tata Coffee, it is expected to deliver a relatively unexciting earnings growth of 8.1%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for Tata Coffee, at least in the near term.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in TATACOFFEE’s future outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe TATACOFFEE 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 TATACOFFEE for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook 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 Tata Coffee at this point in time. Every company has risks, and we've spotted 1 warning sign for Tata Coffee you should know about.

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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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