Is There Now An Opportunity In EPL Limited (NSE:EPL)?

EPL Limited (NSE:EPL), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NSEI over the last few months, increasing to ₹226 at one point, and dropping to the lows of ₹180. 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 EPL's current trading price of ₹180 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 EPL’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 EPL

Is EPL still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 8.1% below my intrinsic value, which means if you buy EPL today, you’d be paying a reasonable price for it. And if you believe the company’s true value is ₹195.53, then there isn’t much room for the share price grow beyond what it’s currently trading. What's more, EPL’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What kind of growth will EPL 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 grow by 74% over the next couple of years, the future seems bright for EPL. 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 EPL’s positive outlook, with shares trading around its fair value. 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 the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on EPL, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - EPL has 1 warning sign we think you should be aware of.

If you are no longer interested in EPL, 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.