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Texmaco Rail & Engineering Limited (NSEI:TEXRAIL), a machinery company based in India, received a lot of attention from a substantial price movement on the NSEI over the last few months, increasing to ₹97.35 at one point, and dropping to the lows of ₹80.8. 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 Texmaco Rail & Engineering’s current trading price of ₹80.8 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 Texmaco Rail & Engineering’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 Texmaco Rail & Engineering
Is Texmaco Rail & Engineering still cheap?
Texmaco Rail & Engineering is currently overpriced based on 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 64.87x is currently well-above the industry average of 29.72x, meaning that it is trading at a more expensive price relative to its peers. Another thing to keep in mind is that Texmaco Rail & Engineering’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
Can we expect growth from Texmaco Rail & Engineering?
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. Texmaco Rail & Engineering’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? It seems like the market has well and truly priced in TEXRAIL’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe TEXRAIL 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.