Should You Investigate Arvind Fashions Limited (NSE:ARVINDFASN) At ₹140?

While Arvind Fashions Limited (NSE:ARVINDFASN) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the NSEI. 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 take a look at Arvind Fashions’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Arvind Fashions

Is Arvind Fashions still cheap?

According to my valuation model, Arvind Fashions seems to be fairly priced at around 0.9% below my intrinsic value, which means if you buy Arvind Fashions today, you’d be paying a fair price for it. And if you believe the company’s true value is ₹140.78, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Arvind Fashions’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Arvind Fashions 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. With profit expected to grow by 71% over the next year, the near-term future seems bright for Arvind Fashions. 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? ARVINDFASN’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on ARVINDFASN, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Be aware that Arvind Fashions is showing 3 warning signs in our investment analysis and 1 of those shouldn't be ignored...

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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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