Is Now The Time To Look At Buying Tata Communications Limited (NSE:TATACOMM)?

Tata Communications Limited (NSE:TATACOMM), might not be a large cap stock, but it saw a decent share price growth of 15% on the NSEI over the last few months. The company is now trading at yearly-high levels following the recent surge in its share price. 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 Tata Communications’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Tata Communications

What Is Tata Communications Worth?

According to our valuation model, Tata Communications seems to be fairly priced at around 3.04% above our intrinsic value, which means if you buy Tata Communications today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth ₹1999.33, then there isn’t really any room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Tata Communications’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Tata Communications 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 more than double over the next couple of years, the future seems bright for Tata Communications. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? TATACOMM’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 financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on TATACOMM, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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.

So while earnings quality is important, it's equally important to consider the risks facing Tata Communications at this point in time. Case in point: We've spotted 3 warning signs for Tata Communications you should be aware of.

If you are no longer interested in Tata Communications, 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.