Are You Considering Buying Balaji Amines Limited (NSE: BALAMINES)?

2021-09-13

Are You Considering Buying Balaji Amines Limited (NSE: BALAMINES)?

Balaji Amines Limited (NSE: BALAMINES) is not the most widely known stock at the moment, but it nevertheless has led the NSEI gainers with a comparatively hefty price hike during the past couple of weeks. Balaji Amines is a small-cap stock that analysts hardly cover. Yet, there is commonly more opportunity for mispricing for Balaji Amines since there is less activity to push the stock closer to fair-minded or impartial value. So the central question arises: Is there still an opportunity here to buy the stock?

Is Balaji Amines still cheap as they used to be?

According to my multiple price models, Balaji Amines appears to be expensive. This factor alone makes a comparison between the industry average and the company's price-to-earnings ratio. The stock's ratio of Balaji Amines is 45.57x currently, which is well above the industry average of 21.38x. It simply implies that Balaji Amines is trading at a higher price compared to its peers. So, if you are interested or like the stock, you may want to keep a very close eye out for a potential price decline shortly. Since Balaji Amines's share is reasonably unpredictable (i.e. its price movements are overstated comparative for the market), this could mean that the prices for the same can sink lower. On the other hand, this will give us another chance to buy it in the future. It is based on its high beta, which qualifies as a good indicator for the volatily of share prices.

The Future of Balaji Amines

Outlook on the future is an important aspect when you are considering buying a stock. It is especially true if you are an investor who is looking for growth in your portfolio. Most commonly, value investors would argue that the intrinsic value relative to the price matters the most. But a more compelling investment thesis might be high growth potential at a reasonable rate. For example, the earnings of Balaji Amines over the next few years are expected to increase by about 64%. Thus, it will indicate a highly optimistic future ahead of the company. Further, it should also lead to more robust cash flows, eventually leading to a higher share value.

What this means for you

  • If you are a shareholder: It might seem to you like the market has genuinely priced in BALAMINES's positive outlook if you are a shareholder. Even the shares might seem like trading above industry price multiples. Shareholders may as well be asking a different question at the current price: Should I sell it? Selling high and repurchasing it up again when the price falls towards the industry PE ratio can be cost-effective for you if you believe BALAMINIES should trade below the current price. However, please look first at whether its fundamentals have changed before you make this decision.
  • If you are a potential investor: For you, now may not seem like be the best time to enter into the stock if you've been keeping an eye on BALAMINES for a while. The reason is quite simple. The price has exceeded its industry peers, meaning there is likely no more upside from mispricing, but still it's confusing the maket.

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