Larsen & Toubro Infotech Limited (NSE:LTI), is not the biggest company in the market, but it has garnered a lot of attention due to a substantial price movement on the NSEI over the past few months, rising to ₹6,326 at one point, and dropping to a low of ₹3,824. Certain movements in the stock price can give investors a better opportunity to get into the stock and potentially buy at a lower price. A question that needs to be answered is whether Larsen & Toubro Infotech’s current stock price of ₹3,975 reflects the true value of the mid cap? Or is it currently undervalued, giving us the opportunity to buy? Let’s take a look at Larsen & Toubro Infotech’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 Larsen & Toubro Infotech
What is Larsen & Toubro Infotech worth?
According to my multiple price model, which compares the company’s price-earnings ratio to the industry average, the stock price seems justified. In this case, I used the Price/Earnings (PE) ratio since there is not enough information to reliably predict the stock’s cash flow. I find that the 28.63x ratio of Larsen & Toubro Infotech is trading slightly above the 26.09x ratio of its industry peers, which means that if you buy Larsen & Toubro Infotech today, you would pay a relatively reasonable price. And if you believe that Larsen & Toubro Infotech should trade at this level for the long term, then there should be only a fairly intangible downside compared to other industry peers. Also, it seems that Larsen & Toubro Infotech’s stock price is quite stable, which means there may be less chance to buy low in the future now that its price is similar to that of its industry peers. This is because the stock is less volatile than the broader market given its low beta.
Can we expect growth from Larsen & Toubro Infotech?
Investors looking for portfolio growth may want to consider a company’s prospects before buying its stock. Buying a big company with solid prospects at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. With profits expected to increase by 35% over the next two years, the future looks bright for Larsen & Toubro Infotech. It seems that a higher cash flow is expected for the stock, which should translate into a higher valuation of the stock.
What does this mean to you :
Are you a shareholder? It looks like the market has already priced in the positive outlook for LTI, with stocks trading around industry price multiples. However, there are also other important factors that we have not considered today, such as the financial strength of the company. Have these factors changed since the last time you consulted LTI? Will you be confident enough to invest in the company if the price drops below the industry PE ratio?
Are you a potential investor? If you’ve been keeping an eye on LTI, now might not be the best time to buy, given that it’s trading around industry price multiples. However, the positive outlook is encouraging for LTI, which means it is worth digging deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
With this in mind, we would not consider investing in a stock unless we have a thorough understanding of the risks. For example, Larsen & Toubro Infotech has 3 warning signs (and 1 which is significant) that we think you should know about.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.