PSP Projects Limited (NSE:PSPPROJECT), a ₹15.85b small-cap, is a engineering and construction (E&C) company operating in an industry, which is expected to benefit from higher gross domestic product, high consumer confidence, and upbeat private sector investments. Capital goods analysts are forecasting for the entire industry, a positive double-digit growth of 24.7% in the upcoming year , and a massive growth of 72.1% over the next couple of years. the growth rate of the Indian stock market as a whole. Today, I will analyse the industry outlook, as well as evaluate whether PSP Projects is lagging or leading in the industry.
What’s the catalyst for PSP Projects’s sector growth?
The E&C industry in Indian faces growing competition from players in emerging markets, who are beginning to expand outward and seek to take market share from established global players. In the previous year, the industry saw growth in the forties, beating the Indian market growth of 21.8%. PSP Projects leads the pack with its impressive earnings growth of 57.9% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with PSP Projects poised to deliver a 41.7% growth over the next couple of years compared to the industry’s 24.7%. This growth may make PSP Projects a more expensive stock relative to its peers.
Is PSP Projects and the sector relatively cheap?
The E&C sector’s PE is currently hovering around 17.16x, in-line with the Indian stock market PE of 18.73x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 8.4% on equities compared to the market’s 9.3%. On the stock-level, PSP Projects is trading at a higher PE ratio of 22.69x, making it more expensive than the average E&C stock. In terms of returns, PSP Projects generated 21.8% in the past year, which is 13.5% over the E&C sector.
PSP Projects’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this higher growth prospect is also reflected in the company’s price, suggested by its higher PE ratio relative to its peers. If PSP Projects has been on your watchlist for a while, now may not be the best time to enter into the stock since it is trading at a higher valuation compared to other E&C companies. However, before you make a decision on the stock, I suggest you look at PSP Projects’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has PSPPROJECT’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of PSP Projects? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.