Is Gulf Oil Lubricants India Limited (NSE:GULFOILLUB) Undervalued After Accounting For Its Future Growth?

Gulf Oil Lubricants India Limited (NSE:GULFOILLUB) is considered a high growth stock. However its last closing price of ₹838.5 left investors wondering whether this growth has already been factored into the share price. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.

Check out our latest analysis for Gulf Oil Lubricants India

What are the future expectations?

If you are bullish about Gulf Oil Lubricants India’s growth potential then you are certainly not alone. The consensus forecast from 6 analysts is extremely bullish with earnings per share estimated to surge from current levels of ₹33.036 to ₹48.431 over the next three years. On average, this leads to a growth rate of 16% each year, which illustrates a highly optimistic outlook in the near term.

Can GULFOILLUB’s share price be justified by its earnings growth?

GULFOILLUB is available at a PE (price-to-earnings) ratio of 25.37x today, which tells us the stock is overvalued based on current earnings compared to the Chemicals industry average of 16.3x , and overvalued compared to the IN market average ratio of 17.14x .

NSEI:GULFOILLUB PE PEG Gauge January 8th 19
NSEI:GULFOILLUB PE PEG Gauge January 8th 19

We understand GULFOILLUB seems to be overvalued based on its current earnings, compared to its industry peers. But, seeing as Gulf Oil Lubricants India is perceived as a high-growth stock, we must also account for its earnings growth, which is captured in the PEG ratio. A PE ratio of 25.37x and expected year-on-year earnings growth of 16% give Gulf Oil Lubricants India a higher PEG ratio of 1.54x. So, when we include the growth factor in our analysis, Gulf Oil Lubricants India appears a bit overvalued , based on fundamental analysis.

What this means for you:

GULFOILLUB’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:

  1. Financial Health: Are GULFOILLUB’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Valuation: What is GULFOILLUB worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether GULFOILLUB is currently mispriced by the market.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.