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McLeod Russel India Limited (NSE:MCLEODRUSS), which is in the food 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 ₹88.5 at one point, and dropping to the lows of ₹17.1. 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 McLeod Russel India's current trading price of ₹17.1 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 McLeod Russel India’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for McLeod Russel India
What is McLeod Russel India worth?
Great news for investors – McLeod Russel India is still trading at a fairly cheap price. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 0.71x is currently well-below the industry average of 17x, meaning that it is trading at a cheaper price relative to its peers. Another thing to keep in mind is that McLeod Russel India’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.
What kind of returns can we expect from McLeod Russel India in the future?
What kind of returns can we expect from McLeod Russel India in the future? It’s one thing to get a stock at a low price, but the quality of the company is even more important, as its stock may be cheap or expensive for a reason. We can determine the quality of a stock many ways; one way is to look at how much return it generates relative to the money we’ve invested in the stock. McLeod Russel India is expected to return 3.0% of your investment in the next couple of years if you buy the stock today. This is a pretty average return, which doesn’t significantly add much to the case for owning the stock.
What this means for you:
Are you a shareholder? Although MCLEODRUSS is currently undervalued, the low future return begs the question – is there a better opportunity elsewhere? Consider whether you want to increase your portfolio exposure to MCLEODRUSS, or whether diversifying into another stock may be a better move for your total risk and return.