Commercial Engineers & Body Builders Co Limited (NSEI:CEBBCO), a INR₹1.10B small-cap, is a machinery manufacturing company operating in an industry, which faces increasing demand of capital equipment and machinery from developing economies in Asia, Latin America and the Middle East. Capital goods analysts are forecasting for the entire industry, a relatively muted growth of 8.70% in the upcoming year . Today, I’ll take you through the sector growth expectations, as well as evaluate whether Commercial Engineers & Body Builders Co is lagging or leading in the industry. View our latest analysis for Commercial Engineers & Body Builders Co
What’s the catalyst for Commercial Engineers & Body Builders Co’s sector growth?
Machinery manufacturers face the challenge of managing a plethora of new data so that it becomes useful, adapt technology to run their supply chains and operations more efficiently, and build strategic partnerships that will help grow market share. In the previous year, the industry saw growth in the teens, though still underperforming the wider Indian stock market. Commercial Engineers & Body Builders Co lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means Commercial Engineers & Body Builders Co may be trading cheaper than its peers.
Is Commercial Engineers & Body Builders Co and the sector relatively cheap?
Machinery companies are typically trading at a PE of 35x, higher than the rest of the Indian stock market PE of 28x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry returned a similar 10.04% on equities compared to the market’s 9.78%. Since Commercial Engineers & Body Builders Co’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Commercial Engineers & Body Builders Co’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? Commercial Engineers & Body Builders Co recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto Commercial Engineers & Body Builders Co as part of your portfolio. However, if you’re relatively concentrated in machinery, you may want to value Commercial Engineers & Body Builders Co based on its cash flows to determine if it is overpriced based on its current growth outlook.