Is It Time To Consider Buying JK Lakshmi Cement Limited (NSE:JKLAKSHMI)?

JK Lakshmi Cement Limited (NSE:JKLAKSHMI), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the NSEI. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine JK Lakshmi Cement’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for JK Lakshmi Cement

What's the opportunity in JK Lakshmi Cement?

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 20.47x is currently trading slightly above its industry peers’ ratio of 20.36x, which means if you buy JK Lakshmi Cement today, you’d be paying a relatively sensible price for it. And if you believe JK Lakshmi Cement 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, JK Lakshmi Cement’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.

Can we expect growth from JK Lakshmi Cement?

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. JK Lakshmi Cement's earnings over the next few years are expected to increase by 71%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? JKLAKSHMI’s optimistic future growth appears to have been factored into the current share price, 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 JKLAKSHMI? 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 an eye on JKLAKSHMI, 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 JKLAKSHMI, 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.

If you'd like to know more about JK Lakshmi Cement as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that JK Lakshmi Cement has 3 warning signs and it would be unwise to ignore these.

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This article by Simply Wall St is general in nature. 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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