What Does Tata Communications Limited's (NSE:TATACOMM) Share Price Indicate?

Tata Communications Limited (NSE:TATACOMM), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NSEI over the last few months, increasing to ₹1,417 at one point, and dropping to the lows of ₹1,177. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Tata Communications' current trading price of ₹1,244 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 Tata Communications’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Tata Communications

Is Tata Communications Still Cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 19.96% above my intrinsic value, which means if you buy Tata Communications today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is ₹1037.20, there’s only an insignificant downside when the price falls to its real value. 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 kind of growth will Tata Communications generate?

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. Tata Communications' earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

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 conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs 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.

If you want to dive deeper into Tata Communications, you'd also look into what risks it is currently facing. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Tata Communications.

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.