In This Article:
Fineotex Chemical Limited (NSE:FCL), which is in the chemicals business, and is based in India, saw significant share price volatility over the past couple of months on the NSEI, rising to the highs of ₹54.5 and falling to the lows of ₹35.95. 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 Fineotex Chemical’s current trading price of ₹38.1 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Fineotex Chemical’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 Fineotex Chemical
What’s the opportunity in Fineotex Chemical?
The stock seems fairly valued at the moment according to my relative valuation model. 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 Fineotex Chemical’s ratio of 17.97x is trading slightly above its industry peers’ ratio of 16.38x, which means if you buy Fineotex Chemical today, you’d be paying a relatively fair price for it. And if you believe Fineotex Chemical should be trading in this range, 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 Fineotex Chemical’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 Fineotex Chemical 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 29% over the next year, the near-term future seems bright for Fineotex Chemical. 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? It seems like the market has already priced in FCL’s positive outlook, 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 FCL? Will you have enough conviction to buy should the price fluctuate below the true value?