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Should You Investigate NOCIL Limited (NSE:NOCIL) At ₹82.95?

Simply Wall St

NOCIL Limited (NSE:NOCIL), which is in the chemicals business, and is based in India, received a lot of attention from a substantial price movement on the NSEI over the last few months, increasing to ₹138.1 at one point, and dropping to the lows of ₹82.95. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether NOCIL's current trading price of ₹82.95 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 NOCIL’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for NOCIL

Is NOCIL still cheap?

According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 8.21x is currently trading slightly below its industry peers’ ratio of 11.85x, which means if you buy NOCIL today, you’d be paying a reasonable price for it. And if you believe that NOCIL should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. In addition to this, it seems like NOCIL’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.

What does the future of NOCIL look like?

NSEI:NOCIL Past and Future Earnings, August 17th 2019

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of NOCIL, it is expected to deliver a negative earnings growth of -1.2%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Currently, NOCIL appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on NOCIL, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on NOCIL for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on NOCIL should the price fluctuate below its true value.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on NOCIL. You can find everything you need to know about NOCIL in the latest infographic research report. If you are no longer interested in NOCIL, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.