Is Redington Limited (NSE:REDINGTON) Potentially Undervalued?

Redington Limited (NSE:REDINGTON), might not be a large cap stock, but 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. 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. But what if there is still an opportunity to buy? Let’s examine Redington’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

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Is Redington Still Cheap?

According to our valuation model, the stock is currently overvalued by about 39%, trading at ₹261 compared to our intrinsic value of ₹187.40. This means that the opportunity to buy Redington at a good price has disappeared! Another thing to keep in mind is that Redington’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

See our latest analysis for Redington

What kind of growth will Redington generate?

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. Redington's earnings over the next few years are expected to increase by 29%, 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? It seems like the market has well and truly priced in REDINGTON’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe REDINGTON should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 an eye on REDINGTON for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for REDINGTON, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 3 warning signs for Redington and you'll want to know about them.

If you are no longer interested in Redington, 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.