Is Now The Time To Look At Buying Saregama India Limited (NSE:SAREGAMA)?

While Saregama India Limited (NSE:SAREGAMA) might not have the largest market cap around , it led the NSEI gainers with a relatively large price hike in the past couple of weeks. While good news for shareholders, the company has traded much higher in the past year. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Saregama India’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Saregama India

What Is Saregama India Worth?

According to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. We’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 50.06x is currently well-above the industry average of 37.29x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since Saregama India’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Saregama India generate?

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. With profit expected to grow by 60% over the next couple of years, the future seems bright for Saregama India. 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 well and truly priced in SAREGAMA’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe SAREGAMA should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 SAREGAMA for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for SAREGAMA, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Saregama India, you'd also look into what risks it is currently facing. Case in point: We've spotted 2 warning signs for Saregama India you should be mindful of and 1 of them is a bit unpleasant.

If you are no longer interested in Saregama 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com