Universal Cables Limited (NSEI:UNIVCABLES), a electrical equipment company based in India, received a lot of attention from a substantial price increase on the NSEI in the over the last few months. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Universal Cables’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. See our latest analysis for Universal Cables
What is Universal Cables worth?
Great news for investors – Universal Cables is still trading at a fairly cheap price. 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 11.05x is currently well-below the industry average of 29.9x, meaning that it is trading at a cheaper price relative to its peers. Another thing to keep in mind is that Universal Cables’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 Universal Cables?
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. In Universal Cables’s case, its revenues over the next few years are expected to grow by 33.10%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? Since Universal Cables is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on Universal Cables for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy Universal Cables. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.