Is It Time To Buy Idea Cellular Limited (NSE:IDEA)?

Idea Cellular Limited (NSE:IDEA), a wireless telecom company based in India, saw significant share price volatility over the past couple of months on the NSEI, rising to the highs of ₹80.6 and falling to the lows of ₹51.4. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Idea Cellular's current trading price of ₹55.7 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Idea Cellular’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View out our latest analysis for Idea Cellular

What is Idea Cellular worth?

According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that Idea Cellular’s ratio of 0.8x is trading slightly below its industry peers’ ratio of 1.57x, which means if you buy Idea Cellular today, you’d be paying a relatively reasonable price for it. And if you believe Idea Cellular should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. In addition to this, it seems like Idea Cellular’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Idea Cellular look like?

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. With profit expected to grow by a double-digit 13.00% over the next couple of years, the outlook is positive for Idea Cellular. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? IDEA’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at IDEA? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on IDEA, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for IDEA, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Idea Cellular. You can find everything you need to know about Idea Cellular in the latest infographic research report. If you are no longer interested in Idea Cellular, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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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.