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IndusInd Bank Limited (NSEI:INDUSINDBK) saw a decent share price growth in the teens level on the NSEI over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine IndusInd Bank’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. Check out our latest analysis for IndusInd Bank
What is IndusInd Bank worth?
According to my relative valuation model, the stock is currently overvalued. 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 39.21x is currently well-above the industry average of 19.46x, meaning that it is trading at a more expensive price relative to its peers. In addition to this, it seems like IndusInd Bank’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What does the future of IndusInd Bank 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. 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. IndusInd Bank’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 INDUSINDBK’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 INDUSINDBK 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.
Are you a potential investor? If you’ve been keeping tabs on INDUSINDBK for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for INDUSINDBK, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.