Is It Time To Consider Buying RHI Magnesita India Limited (NSE:RHIM)?

RHI Magnesita India Limited (NSE:RHIM), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the NSEI. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at RHI Magnesita India’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for RHI Magnesita India

Is RHI Magnesita India Still Cheap?

RHI Magnesita India appears to be overvalued by 24% at the moment, based on our discounted cash flow valuation. The stock is currently priced at ₹421 on the market compared to our intrinsic value of ₹338.90. This means that the buying opportunity has probably disappeared for now. Another thing to keep in mind is that RHI Magnesita India’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value 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 to fall back down into an attractive buying range again.

What kind of growth will RHI Magnesita 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. RHI Magnesita India's revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in RHIM’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe RHIM should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 RHIM for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for RHIM, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing RHI Magnesita India at this point in time. In terms of investment risks, we've identified 1 warning sign with RHI Magnesita India, and understanding it should be part of your investment process.

If you are no longer interested in RHI Magnesita 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.