While Vardhman Textiles Limited (NSE:VTL) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the NSEI. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Vardhman Textiles’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for Vardhman Textiles
What’s the opportunity in Vardhman Textiles?
According to my valuation model, Vardhman Textiles seems to be fairly priced at around 3.09% above my intrinsic value, which means if you buy Vardhman Textiles today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is ₹1021.13, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, Vardhman Textiles has a low beta, which suggests its share price is less volatile than the wider market.
What kind of growth will Vardhman Textiles generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Vardhman Textiles’ earnings over the next few years are expected to increase by 86%, 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? VTL’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 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 VTL, now may not be the most advantageous 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 diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
So if you’d like to dive deeper into this stock, it’s crucial to consider any risks it’s facing. While conducting our analysis, we found that Vardhman Textiles has 4 warning signs and it would be unwise to ignore them.
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This article by Simply Wall St is general in nature. 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.
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