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Radico Khaitan Limited (NSEI:RADICO), a beverage company based in India, led the NSEI gainers with a relatively large price hike in the past couple of weeks. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Radico Khaitan’s outlook and value based on the most recent financial data to see if the opportunity still exists. Check out our latest analysis for Radico Khaitan
What is Radico Khaitan worth?
According to my valuation model, the stock is currently overvalued by about 42%, trading at IN₨331.90 compared to my intrinsic value of ₹233.09. This means that the buying opportunity has probably disappeared for now. In addition to this, it seems like Radico Khaitan’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.
What does the future of Radico Khaitan look like?
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. Radico Khaitan’s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? RADICO’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 RADICO 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.
Are you a potential investor? If you’ve been keeping tabs on RADICO for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for RADICO, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.