Is Now The Time To Look At Buying Bharat Heavy Electricals Limited (NSE:BHEL)? - Simply Wall St - Financial Daily News Site

Is Now The Time To Look At Buying Bharat Heavy Electricals Limited (NSE:BHEL)? – Simply Wall St

Bharat Heavy Electricals Limited (NSE:BHEL), might not be a large cap stock, but it saw a decent share price growth in the teens level on the NSEI over the last few months. As a ₹178b market cap stock, it seems odd Bharat Heavy Electricals is not more well-covered by analysts. Although, there is more of an opportunity for mispricing in stocks with low coverage, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on Bharat Heavy Electricals’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Bharat Heavy Electricals

What is Bharat Heavy Electricals worth?

According to my price multiple model, where I compare the company’s price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 39.93x is currently well-above the industry average of 18.16x, meaning that it is trading at a more expensive price relative to its peers. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Bharat Heavy Electricals’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Bharat Heavy Electricals?

earnings-and-revenue-growth
NSEI:BHEL Earnings and Revenue Growth May 28th 2022

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. With revenues expected to grow by a double-digit 28% over the next couple of years, the outlook is positive for Bharat Heavy Electricals. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? BHEL’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe BHEL should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 tabs on BHEL for some time, 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 optimistic prospect is encouraging for BHEL, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

With this in mind, we wouldn’t consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we’ve identified 1 warning sign with Bharat Heavy Electricals, and understanding it should be part of your investment process.

If you are no longer interested in Bharat Heavy Electricals, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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