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NOCIL Limited (NSEI:NOCIL), a chemicals company based in India, saw significant share price volatility over the past couple of months on the NSEI, rising to the highs of ₹228.95 and falling to the lows of ₹181.6. 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 NOCIL’s current trading price of ₹191.85 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 NOCIL’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 NOCIL
Is NOCIL still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that NOCIL’s ratio of 25.71x is trading slightly above its industry peers’ ratio of 21.32x, which means if you buy NOCIL today, you’d be paying a relatively fair price for it. And if you believe that NOCIL should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because NOCIL’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 NOCIL 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 38.41% over the next couple of years, the future seems bright for NOCIL. It looks like higher cash flows 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 NOCIL’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 track record of its management team. Have these factors changed since the last time you looked at NOCIL? Will you have enough confidence to invest in the company should the price drop below its fair value?