Should You Think About Buying KPIT Technologies Limited (NSE:KPITTECH) Now?

While KPIT Technologies Limited (NSE:KPITTECH) might not have the largest market cap around , it saw a double-digit share price rise of over 10% in the past couple of months on the NSEI. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. With many analysts covering the mid-cap 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 take a look at KPIT Technologies’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for KPIT Technologies

Is KPIT Technologies Still Cheap?

KPIT Technologies is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. 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 57.15x is currently well-above the industry average of 40.55x, 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? Given that KPIT Technologies’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.

Can we expect growth from KPIT Technologies?

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 60% over the next couple of years, the future seems bright for KPIT Technologies. 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 KPITTECH’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe KPITTECH 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 tabs on KPITTECH for some time, 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 KPITTECH, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing KPIT Technologies at this point in time. In terms of investment risks, we've identified 2 warning signs with KPIT Technologies, and understanding them should be part of your investment process.

If you are no longer interested in KPIT Technologies, 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.