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Infibeam Avenues Limited (NSE:INFIBEAM), which is in the online retail business, and is based in India, saw a decent share price growth in the teens level on the NSEI over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Infibeam Avenues’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
View our latest analysis for Infibeam Avenues
What is Infibeam Avenues worth?
According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 21.52x is currently trading slightly above its industry peers’ ratio of 20.55x, which means if you buy Infibeam Avenues today, you’d be paying a relatively fair price for it. And if you believe that Infibeam Avenues should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Furthermore, it seems like Infibeam Avenues’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Infibeam Avenues 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. Though in the case of Infibeam Avenues, it is expected to deliver a relatively unexciting earnings growth of 3.7%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for Infibeam Avenues, at least in the near term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in INFIBEAM’s growth 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 INFIBEAM? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on INFIBEAM, now may not be the most optimal time to buy, given it is trading around its fair value. 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.