In This Article:
Indian Terrain Fashions Limited (NSE:INDTERRAIN), a ₹5.0b small-cap, operates in the consumer discretionary industry, whose sales are driven primarily by consumer sentiment and access to capital. These macro factors tend to determine the rate at which consumers purchase luxury goods. Consumer discretionary analysts are forecasting for the entire industry, a positive double-digit growth of 25% in the upcoming year , and a whopping growth of 72% over the next couple of years. the growth rate of the Indian stock market as a whole. Today, I will analyse the industry outlook, as well as evaluate whether Indian Terrain Fashions is lagging or leading in the industry.
View our latest analysis for Indian Terrain Fashions
What’s the catalyst for Indian Terrain Fashions’s sector growth?
E-commerce continues to be the fastest growing sales platform, changing the retail landscape. Over the past year, the industry saw growth in the teens, though still underperforming the wider Indian stock market. Indian Terrain Fashions lags the pack with its negative growth rate of -8.4% over the past year, which indicates the company has been growing at a slower pace than its luxury goods. peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 38% in the upcoming year. This future growth may make Indian Terrain Fashions a more expensive stock relative to its peers.
Is Indian Terrain Fashions and the sector relatively cheap?
Luxury goods companies are typically trading at a PE of 13.82x, in-line with the Indian stock market PE of 17.53x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. However, the industry returned a lower 7.3% compared to the market’s 9.5%, potentially indicative of past headwinds. On the stock-level, Indian Terrain Fashions is trading at a higher PE ratio of 19.64x, making it more expensive than the average luxury goods. stock. In terms of returns, Indian Terrain Fashions generated 13% in the past year, which is 5.3% over the luxury goods. sector.
Next Steps:
Indian Terrain Fashions’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this higher growth prospect is also reflected in the company’s price, suggested by its higher PE ratio relative to its peers. If Indian Terrain Fashions has been on your watchlist for a while, now may not be the best time to enter into the stock since it is trading at a higher valuation compared to other luxury goods companies. However, before you make a decision on the stock, I suggest you look at Indian Terrain Fashions’s fundamentals in order to build a holistic investment thesis.