Jindal Cotex Limited (NSEI:JINDCOT), a INR₹411.78M small-cap, is a consumer discretionary company operating in an industry, whose performance is predominantly driven by consumer confidence. Macro elements tend to determine how fast, and how often, consumers buy luxury goods. Consumer discretionary analysts are forecasting for the entire industry, a positive double-digit growth of 11.84% in the upcoming year . Today, I will analyse the industry outlook, and also determine whether Jindal Cotex is a laggard or leader relative to its consumer discretionary sector peers. Check out our latest analysis for Jindal Cotex

What’s the catalyst for Jindal Cotex’s sector growth?

E-retailing is expected to remain the fastest growing sales channel, shifting the retail landscape. Significant number of retail store closures and bankruptcies were an indication of both changing consumer preferences and rising online competition. Over the past year, the industry saw negative growth of -2.49%, underperforming the Indian market growth of 13.05%. Jindal Cotex lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means Jindal Cotex may be trading cheaper than its peers.

Is Jindal Cotex and the sector relatively cheap?

Luxury goods companies are typically trading at a PE of 22x, lower than the rest of the Indian stock market PE of 28x. This illustrates a somewhat under-priced sector compared to the rest of the market. Though, the industry returned a similar 8.54% on equities compared to the market’s 9.78%. Since Jindal Cotex’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Jindal Cotex’s value is to assume the stock should be relatively in-line with its industry.

What this means for you:

Are you a shareholder? Jindal Cotex recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto Jindal Cotex as part of your portfolio. However, if you’re relatively concentrated in luxury goods, you may want to value Jindal Cotex based on its cash flows to determine if it is overpriced based on its current growth outlook.

Are you a potential investor? If Jindal Cotex has been on your watchlist for a while, now may be the time to enter into the stock, if you like its ability to deliver growth and are not highly concentrated in the luxury goods industry. Before you make a decision on the stock, take a look at Jindal Cotex’s cash flows and assess whether the stock is trading at a fair price.