Timken India Limited (NSE:TIMKEN), a machinery company based in India, saw significant share price volatility over the past couple of months on the NSEI, rising to the highs of ₹773.45 and falling to the lows of ₹667.65. 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 Timken India’s current trading price of ₹731.75 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 Timken India’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 Timken India
Is Timken India still cheap?
Timken India is currently overpriced based on 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 Timken India’s ratio of 53.57x is above its peer average of 26.33x, which suggests the stock is overvalued compared to the Machinery industry. Furthermore, Timken India’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
Can we expect growth from Timken India?
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 91.33% over the next couple of years, the future seems bright for Timken 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? It seems like the market has well and truly priced in TIMKEN’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 TIMKEN 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 TIMKEN 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 TIMKEN, 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 Timken India. You can find everything you need to know about Timken India in the latest infographic research report. If you are no longer interested in Timken 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.