Is Bharat Electronics Limited (NSE:BEL) Undervalued?
Bharat Electronics Limited (NSEI:BEL), a aerospace & defense company based in India, saw a double-digit share price rise of over 10% in the past couple of months on the NSEI. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Bharat Electronics’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. View our latest analysis for Bharat Electronics
Is Bharat Electronics still cheap?
Bharat Electronics appears to be overvalued by 93% at the moment, based on my discounted cash flow valuation. The stock is currently priced at ₹182.45 on the market compared to my intrinsic value of ₹94.7. This means that the opportunity to buy Bharat Electronics at a good price has disappeared! Furthermore, Bharat Electronics’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What kind of growth will Bharat Electronics generate?
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. Bharat Electronics’s earnings over the next few years are expected to increase by 44.38%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? Bharat Electronics’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe Bharat Electronics 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 an eye on Bharat Electronics for a while, 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 positive outlook is encouraging for Bharat Electronics, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Bharat Electronics. You can find everything you need to know about Bharat Electronics in the latest infographic research report. If you are no longer interested in Bharat Electronics, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
