When Should You Buy E.I.D.- Parry (India) Limited (NSE:EIDPARRY)?

E.I.D.- Parry (India) Limited (NSE:EIDPARRY), might not be a large cap stock, but it saw a decent share price growth in the teens level on the NSEI over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on E.I.D.- Parry (India)’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for E.I.D.- Parry (India)

What is E.I.D.- Parry (India) worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 17.68x is currently trading slightly above its industry peers’ ratio of 17.43x, which means if you buy E.I.D.- Parry (India) today, you’d be paying a relatively reasonable price for it. And if you believe E.I.D.- Parry (India) should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Furthermore, E.I.D.- Parry (India)’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What kind of growth will E.I.D.- Parry (India) generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to more than double over the next couple of years, the future seems bright for E.I.D.- Parry (India). 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 already priced in EIDPARRY’s positive outlook, with shares trading around industry price multiples. 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 EIDPARRY? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on EIDPARRY, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for EIDPARRY, 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.

If you'd like to know more about E.I.D.- Parry (India) as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 3 warning signs for E.I.D.- Parry (India) and we think they deserve your attention.

If you are no longer interested in E.I.D.- Parry (India), 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.