Should You Buy HOV Services Limited (NSE:HOVS) Now?

HOV Services Limited (NSEI:HOVS), a it company based in India, saw a significant share price rise of over 20% 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 HOV Services’s outlook and value based on the most recent financial data to see if the opportunity still exists. See our latest analysis for HOV Services

What is HOV Services worth?

According to my relative valuation model, the stock is currently overvalued. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 12.34x is currently well-above the industry average of 2.59x, meaning that it is trading at a more expensive price relative to its peers. In addition to this, it seems like HOV Services’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What does the future of HOV Services look like?

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 revenue growth of 0.27% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for HOV Services, at least in the short term.

What this means for you:

Are you a shareholder? HOV Services’s future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe HOV Services 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 HOV Services 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 positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on HOV Services. You can find everything you need to know about HOV Services in the latest infographic research report. If you are no longer interested in HOV Services, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.