Gravita India Limited (NSEI:GRAVITA), a metals and mining company based in India, received a lot of attention from a substantial price increase on the NSEI in the over the last few months. Less-covered, small caps tend to present 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? Today I will analyse the most recent data on Gravita India’s outlook and valuation to see if the opportunity still exists. View our latest analysis for Gravita India
What is Gravita India worth?
According to my valuation model, the stock is currently overvalued by about 72%, trading at ₹182.3 compared to my intrinsic value of ₹105.73. This means that the opportunity to buy Gravita India at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Gravita India’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 kind of growth will Gravita India generate?
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. 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. Gravita India’s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in Gravita India’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe Gravita India should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 Gravita India for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for Gravita India, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.