Is Now The Time To Look At Buying Adani Transmission Limited (NSE:ADANITRANS)?

Today we're going to take a look at the well-established Adani Transmission Limited (NSE:ADANITRANS). The company's stock saw significant share price movement during recent months on the NSEI, rising to highs of ₹1,125 and falling to the lows of ₹752. 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 Adani Transmission's current trading price of ₹773 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Adani Transmission’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Adani Transmission

What Is Adani Transmission Worth?

Adani Transmission appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Adani Transmission’s ratio of 68.65x is above its peer average of 14.33x, which suggests the stock is trading at a higher price compared to the Electric Utilities industry. But, is there another opportunity to buy low in the future? Given that Adani Transmission’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Adani Transmission 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. However, with a relatively muted revenue growth of 5.1% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Adani Transmission, at least in the short term.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in ADANITRANS’s outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe ADANITRANS should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 tabs on ADANITRANS for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive growth outlook may mean 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. For example - Adani Transmission has 1 warning sign we think you should be aware of.

If you are no longer interested in Adani Transmission, 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.