Today we take a look at the well-established Tech Mahindra Limited (NSE:TECHM). The company’s stock has attracted a lot of attention due to significant price movement on the NSEI over the past few months, which at one point surged to ₹ 1,150 and fell to a low of ₹ 999. Some stock price movements can give investors a better opportunity to enter the stock and potentially buy at a lower price. The question that needs to be answered is whether Tech Mahindra’s current trading price of ₹ 1,083 reflects the real value of the large cap? Or is it currently undervalued, giving us a buying opportunity? Let’s take a look at Tech Mahindra’s outlook and value based on its latest financials to see if there are any catalysts for a price change.
Our analysis indicates that TECHM is potentially underrated!
Is Tech Mahindra still cheap?
The stock is currently trading at INR 1083 on the stock market, which means it is overvalued by 37% compared to my intrinsic value of INR 788.40. Not the best news for investors looking to buy! Furthermore, Tech Mahindra’s share price also appears relatively stable compared to the rest of the market, as indicated by its low beta. If you believe that the stock price should eventually reach its true value, a low beta might suggest that it is unlikely to do so quickly any time soon, and once there, it may be difficult to get back into an attractive buying range .
What does the future of Tech Mahindra look like?
Future prospects are an important consideration when looking at buying stocks, especially if you are an investor looking for growth in your portfolio. Buying a great company with strong prospects at a low price is always a good investment, so let’s also look at the company’s future prospects. With profits expected to grow by 31% over the next few years, the future looks bright for Tech Mahindra. More cash flow appears to be on the cards for the stock, which should contribute to higher stock value.
What does this mean for you?
Are you a shareholder? The market appears to have well and truly priced in TECHM’s positive outlook, with the stock trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe that TECHM should trade below its current price, selling high and buying again when the price drops to a realistic value can be profitable. But before you make this decision, see if its fundamentals have changed.
Are you a potential investor? If you’ve been following TECHM for a while, now may not be the best time to enter the stock. The price has exceeded its true value, which means there is no advantage to the mispricing. However, the positive outlook is encouraging for TECHM, which means it’s worth diving deeper into other factors to take advantage of the next price drop.
In light of this, if you want to do more analysis on a company, it is vital that you are informed of the risks involved. In terms of investment risk, we identified 1 warning sign with Tech Mahindra, and understanding should be part of your investment process.
If you are no longer interested in Tech Mahindra, you can use our free platform to view our list of over 50 other stocks with high growth potential.
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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 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 into account your goals or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simpli Wall St has no position in any of the stocks mentioned.