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Siyaram Silk Mills Limited (NSEI:SIYSIL), a luxury company based in India, received a lot of attention from a substantial price movement on the NSEI in the over the last few months, increasing to ₹773.65 at one point, and dropping to the lows of ₹602.95. 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 Siyaram Silk Mills’s current trading price of ₹602.95 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 Siyaram Silk Mills’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 Siyaram Silk Mills
What is Siyaram Silk Mills worth?
Siyaram Silk Mills 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 26.59x is currently well-above the industry average of 17.07x, meaning that it is trading at a more expensive price relative to its peers. Another thing to keep in mind is that Siyaram Silk Mills’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 Siyaram Silk Mills?
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. With profit expected to grow by 37.28% over the next couple of years, the future seems bright for Siyaram Silk Mills. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? SIYSIL’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe SIYSIL 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.