Finolex Industries Limited (NSEI:FINOLEXIND), a chemicals company based in India, saw significant share price volatility over the past couple of months on the NSEI, rising to the highs of ₹738.2 and falling to the lows of ₹613.15. 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 Finolex Industries’s current trading price of ₹660.15 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 Finolex Industries’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for Finolex Industries
What’s the opportunity in Finolex Industries?
Finolex Industries appears to be overvalued by 74% at the moment, based on my discounted cash flow valuation. The stock is currently priced at ₹660.15 on the market compared to my intrinsic value of ₹378.44. This means that the buying opportunity has probably disappeared for now. In addition to this, it seems like Finolex Industries’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Finolex Industries?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 31.01% over the next couple of years, the future seems bright for Finolex Industries. 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? Finolex Industries’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 Finolex Industries 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.