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Excel Industries Limited (NSE:EXCELINDUS), which is in the chemicals business, and is based in India, saw a double-digit share price rise of over 10% in the past couple of months on the NSEI. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at Excel Industries’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Excel Industries

What’s the opportunity in Excel Industries?

The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Excel Industries’s ratio of 18.37x is trading slightly above its industry peers’ ratio of 14.97x, which means if you buy Excel Industries today, you’d be paying a relatively reasonable price for it. And if you believe Excel Industries should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, it seems like Excel Industries’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Excel Industries look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With revenues expected to grow by 56% over the next couple of years, the future seems bright for Excel Industries. 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? It seems like the market has already priced in EXCELINDUS’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at EXCELINDUS? Will you have enough conviction to buy should the price fluctuate below the true value?

Are you a potential investor? If you’ve been keeping an eye on EXCELINDUS, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for EXCELINDUS, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, 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 Excel Industries. You can find everything you need to know about Excel Industries in the latest infographic research report. If you are no longer interested in Excel Industries, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.