Stock Analysis

At ₹955, Is Tata Chemicals Limited (NSE:TATACHEM) Worth Looking At Closely?

NSEI:TATACHEM
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Tata Chemicals Limited (NSE:TATACHEM), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NSEI over the last few months, increasing to ₹1,188 at one point, and dropping to the lows of ₹892. 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 Tata Chemicals' current trading price of ₹955 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Tata Chemicals’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Tata Chemicals

Is Tata Chemicals Still Cheap?

Great news for investors – Tata Chemicals is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Tata Chemicals’s ratio of 12.23x is below its peer average of 19.2x, which indicates the stock is trading at a lower price compared to the Chemicals industry. Tata Chemicals’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What kind of growth will Tata Chemicals generate?

earnings-and-revenue-growth
NSEI:TATACHEM Earnings and Revenue Growth January 31st 2023

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. However, with a relatively muted profit growth of 1.9% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Tata Chemicals, at least in the short term.

What This Means For You

Are you a shareholder? Even though growth is relatively muted, since TATACHEM is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on TATACHEM for a while, now might be the time to enter the stock. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy TATACHEM. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.

Diving deeper into the forecasts for Tata Chemicals mentioned earlier will help you understand how analysts view the stock going forward. So feel free to check out our free graph representing analyst forecasts.

If you are no longer interested in Tata Chemicals, 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.