What Does Steel Authority of India Limited’s (NSE:SAIL) Share Price Indicate?
Steel Authority of India Limited (NSEI:SAIL), a metals and mining company based in India, led the NSEI gainers with a relatively large price hike in the past couple of weeks. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today I will analyse the most recent data on Steel Authority of India’s outlook and valuation to see if the opportunity still exists. See our latest analysis for Steel Authority of India
What’s the opportunity in Steel Authority of India?
According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that Steel Authority of India’s ratio of 0.9x is trading slightly below its industry peers’ ratio of 1.7x, which means if you buy Steel Authority of India today, you’d be paying a relatively fair price for it. And if you believe Steel Authority of India should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Steel Authority of India’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Steel Authority of India generate?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. With profit expected to grow by 52.00% over the next year, the near-term future seems bright for Steel Authority of India. 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? Steel Authority of India’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at Steel Authority of India? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on Steel Authority of India, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for Steel Authority of India, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, 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 Steel Authority of India. You can find everything you need to know about Steel Authority of India in the latest infographic research report. If you are no longer interested in Steel Authority of India, 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.
