Is It Too Late To Consider Buying S Chand and Company Limited (NSE:SCHAND)?

S Chand and Company Limited (NSE:SCHAND), is not the largest company out there, but it led the NSEI gainers with a relatively large price hike in the past couple of weeks. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine S Chand’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for S Chand

What's The Opportunity In S Chand?

Great news for investors – S Chand is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is ₹271.70, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that S Chand’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will S Chand generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for S Chand, at least in the near future.

What This Means For You

Are you a shareholder? Although SCHAND is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to SCHAND, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on SCHAND for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So while earnings quality is important, it's equally important to consider the risks facing S Chand at this point in time. Be aware that S Chand is showing 3 warning signs in our investment analysis and 1 of those is a bit concerning...

If you are no longer interested in S Chand, 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.