Is Now The Time To Look At Buying Intellect Design Arena Limited (NSE:INTELLECT)?

Intellect Design Arena Limited (NSE:INTELLECT), is not the largest company out there, but it received a lot of attention from a substantial price increase on the NSEI over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Intellect Design Arena’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Intellect Design Arena

What's the opportunity in Intellect Design Arena?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Intellect Design Arena’s ratio of 27.15x is trading slightly below its industry peers’ ratio of 30.18x, which means if you buy Intellect Design Arena today, you’d be paying a decent price for it. And if you believe that Intellect Design Arena should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because Intellect Design Arena’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 does the future of Intellect Design Arena look like?

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. 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 55% over the next couple of years, the future seems bright for Intellect Design Arena. 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 already priced in INTELLECT’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at INTELLECT? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on INTELLECT, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for INTELLECT, which means it’s worth further examining 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. While conducting our analysis, we found that Intellect Design Arena has 1 warning sign and it would be unwise to ignore this.

If you are no longer interested in Intellect Design Arena, 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.