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Today we’re going to take a look at the well-established State Bank of India (NSEI:SBIN). The company’s stock received a lot of attention from a substantial price movement on the NSEI over the last few months, increasing to ₹301.4 at one point, and dropping to the lows of ₹233.2. 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 State Bank of India’s current trading price of ₹241.95 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at State Bank of India’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 State Bank of India
What is State Bank of India worth?
State Bank of India appears to be overvalued according to my relative valuation model. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 25169x is currently well-above the industry average of 19.29x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since State Bank of India’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from State Bank of India?
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. State Bank of 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? SBIN’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe SBIN 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.