Should You Investigate Bodal Chemicals Limited (NSE:BODALCHEM) At ₹95.80?

Bodal Chemicals Limited (NSE:BODALCHEM), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the NSEI. 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 take a look at Bodal Chemicals’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Bodal Chemicals

What's the opportunity in Bodal Chemicals?

Bodal Chemicals is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 28.57x is currently well-above the industry average of 16.84x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since Bodal Chemicals’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.

What kind of growth will Bodal Chemicals generate?

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 profit expected to more than double over the next couple of years, the future seems bright for Bodal Chemicals. 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? BODALCHEM’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe BODALCHEM should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 BODALCHEM 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 positive outlook is encouraging for BODALCHEM, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Bodal Chemicals, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Bodal Chemicals has 3 warning signs and it would be unwise to ignore these.

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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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