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Bodal Chemicals Limited (NSE:BODALCHEM), which is in the chemicals business, and is based in India, received a lot of attention from a substantial price movement on the NSEI over the last few months, increasing to ₹119.6 at one point, and dropping to the lows of ₹67.05. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Bodal Chemicals's current trading price of ₹67.05 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 Bodal Chemicals’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Bodal Chemicals
Is Bodal Chemicals still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Bodal Chemicals’s ratio of 6.36x is trading slightly below its industry peers’ ratio of 11.32x, which means if you buy Bodal Chemicals today, you’d be paying a reasonable price for it. And if you believe Bodal Chemicals should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. In addition to this, it seems like Bodal Chemicals’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Bodal Chemicals?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. In the upcoming year, Bodal Chemicals’s earnings are expected to increase by 26%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? BODALCHEM’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at BODALCHEM? Will you have enough conviction to buy should the price fluctuate below the true value?