Why Mastek Limited (NSE:MASTEK) Could Be Worth Watching

While Mastek Limited (NSE:MASTEK) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the NSEI over the last few months. With many analysts covering the 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? Today I will analyse the most recent data on Mastek’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Mastek

What's The Opportunity In Mastek?

Great news for investors – Mastek is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 Mastek’s ratio of 22.47x is below its peer average of 32.15x, which indicates the stock is trading at a lower price compared to the IT industry. However, given that Mastek’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.

What does the future of Mastek 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. Mastek's earnings over the next few years are expected to increase by 48%, 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? Since MASTEK is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With a positive profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on MASTEK for a while, now might be the time to enter the stock. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy MASTEK. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.

If you want to dive deeper into Mastek, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Mastek has 2 warning signs and it would be unwise to ignore them.

If you are no longer interested in Mastek, 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.