When Should You Buy Chambal Fertilisers and Chemicals Limited (NSE:CHAMBLFERT)?

Chambal Fertilisers and Chemicals Limited (NSE:CHAMBLFERT), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the NSEI. Less-covered, small caps sees 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 Chambal Fertilisers and Chemicals’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Chambal Fertilisers and Chemicals

What Is Chambal Fertilisers and Chemicals Worth?

According to my valuation model, the stock is currently overvalued by about 26%, trading at ₹290 compared to my intrinsic value of ₹229.85. Not the best news for investors looking to buy! Another thing to keep in mind is that Chambal Fertilisers and Chemicals’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What kind of growth will Chambal Fertilisers and Chemicals 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. With profit expected to grow by 46% over the next couple of years, the future seems bright for Chambal Fertilisers and 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? It seems like the market has well and truly priced in CHAMBLFERT’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe CHAMBLFERT 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 CHAMBLFERT 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 optimistic prospect is encouraging for CHAMBLFERT, which 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 Chambal Fertilisers and Chemicals at this point in time. For example, Chambal Fertilisers and Chemicals has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

If you are no longer interested in Chambal Fertilisers and Chemicals, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.