NIIT Limited (NSE:NIITLTD): Can Growth Justify Its January Share Price?

NIIT Limited (NSE:NIITLTD) closed yesterday at ₹83.95, which left some investors asking whether the high earnings potential can still be justified at this price. Let’s take a look at some key metrics to determine whether there's any value here for current and potential future investors.

View our latest analysis for NIIT

How is NIITLTD going to perform in the future?

NIIT is poised for significantly high earnings growth in the near future. Expectations from 3 analysts are extremely positive with earnings forecasted to rise significantly from today's level of ₹4.998 to ₹9.795 over the next three years. This indicates an estimated earnings growth rate of 27% per year, on average, which indicates an exceedlingly positive future in the near term.

Is NIITLTD available at a good price after accounting for its growth?

NIIT is available at a price-to-earnings ratio of 16.85x, showing us it is undervalued relative to the current IN market average of 16.97x , and overvalued based on current earnings compared to the IT industry average of 16.16x .

We understand NIITLTD seems to be overvalued based on its current earnings, compared to its industry peers. But, seeing as NIIT is perceived as a high-growth stock, we must also account for its earnings growth, which is captured in the PEG ratio. A PE ratio of 16.85x and expected year-on-year earnings growth of 27% give NIIT a very low PEG ratio of 0.63x. So, when we include the growth factor in our analysis, NIIT appears relatively cheap , based on fundamental analysis.

What this means for you:

NIITLTD's current undervaluation could signal a potential buying opportunity to increase your exposure to the stock, or it you're a potential investor, now may be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:

1. Financial Health: Are NIITLTD’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
2. Past Track Record: Has NIITLTD been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of NIITLTD's historicals for more clarity.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

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.