At ₹2,086, Is Deepak Nitrite Limited (NSE:DEEPAKNTR) Worth Looking At Closely?

Deepak Nitrite Limited (NSE:DEEPAKNTR), is not the largest company out there, but it saw significant share price movement during recent months on the NSEI, rising to highs of ₹2,926 and falling to the lows of ₹2,056. 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 Deepak Nitrite's current trading price of ₹2,086 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 Deepak Nitrite’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 Deepak Nitrite

Is Deepak Nitrite still cheap?

Deepak Nitrite appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 26.77x is currently well-above the industry average of 17.25x, meaning that it is trading at a more expensive price relative to its peers. Another thing to keep in mind is that Deepak Nitrite’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers 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 for it to fall back down into an attractive buying range again.

What kind of growth will Deepak Nitrite 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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Deepak Nitrite, it is expected to deliver a relatively unexciting earnings growth of 9.8%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, 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 DEEPAKNTR’s outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe DEEPAKNTR 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 DEEPAKNTR 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 growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 1 warning sign for Deepak Nitrite you should be aware of.

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

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.

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