LT Foods Limited (NSE:DAAWAT), which is in the food business, and is based in India, saw a significant share price rise of over 20% in the past couple of months on the NSEI. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine LT Foods’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for LT Foods

What's the opportunity in LT Foods?

Great news for investors – LT Foods is still trading at a fairly cheap price. 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 5.51x is currently well-below the industry average of 14.08x, meaning that it is trading at a cheaper price relative to its peers. However, given that LT Foods’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of LT Foods look like?

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. LT Foods’s earnings growth are expected to be in the teens in the upcoming year, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since DAAWAT is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on DAAWAT for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy DAAWAT. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on LT Foods. You can find everything you need to know about LT Foods in the latest infographic research report. If you are no longer interested in LT Foods, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.