What Does KPIT Technologies Limited's (NSE:KPITTECH) Share Price Indicate?

While KPIT Technologies Limited (NSE:KPITTECH) might not be the most widely known stock at the moment, it led the NSEI gainers with a relatively large price hike in the past couple of weeks. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. 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.

Our analysis indicates that KPITTECH is potentially overvalued!

Is KPIT Technologies Still Cheap?

KPIT Technologies appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. I’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 61.03x is currently well-above the industry average of 33.79x, 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? Since KPIT Technologies’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from KPIT Technologies?

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. KPIT Technologies' earnings over the next few years are expected to increase by 91%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? KPITTECH’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I 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 positive outlook is encouraging for KPITTECH, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into KPIT Technologies, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with KPIT Technologies, and understanding this 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.