Meghmani Organics Limited (NSE:MEGH), 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 ₹112.25 and falling to the lows of ₹80.95. 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 Meghmani Organics’s current trading price of ₹87.95 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 Meghmani Organics’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 Meghmani Organics
What is Meghmani Organics worth?
The stock is currently trading at ₹87.95 on the share market, which means it is overvalued by 51.8% compared to my intrinsic value of ₹57.94. This means that the opportunity to buy Meghmani Organics at a good price has disappeared! But, is there another opportunity to buy low in the future? Given that Meghmani Organics’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Meghmani Organics?
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. Meghmani Organics’s earnings growth are expected to be in the teens in the upcoming year, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in MEGH’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe MEGH 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 MEGH 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 optimistic prospect is encouraging for MEGH, 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 Meghmani Organics. You can find everything you need to know about Meghmani Organics in the latest infographic research report. If you are no longer interested in Meghmani Organics, 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.