UltraTech Cement Limited (NSE:ULTRACEMCO) saw significant share price volatility over the past couple of months on the NSEI, rising to the highs of ₹4230.25 and falling to the lows of ₹3648. 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 UltraTech Cement’s current trading price of ₹3651.35 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at UltraTech Cement’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View out our latest analysis for UltraTech Cement
What is UltraTech Cement worth?
UltraTech Cement appears to be overvalued according to my relative valuation model. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that UltraTech Cement’s ratio of 45.11x is above its peer average of 21.2x, which suggests the stock is overvalued compared to the Basic Materials industry. Another thing to keep in mind is that UltraTech Cement’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
Can we expect growth from UltraTech Cement?
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. UltraTech Cement’s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger 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 ULTRACEMCO’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe ULTRACEMCO 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 ULTRACEMCO for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for ULTRACEMCO, 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 UltraTech Cement. You can find everything you need to know about UltraTech Cement in the latest infographic research report. If you are no longer interested in UltraTech Cement, 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.