Stock Analysis
While Apollo Tyres Limited (NSE:APOLLOTYRE) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the NSEI over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at Apollo Tyres’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for Apollo Tyres
According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 Apollo Tyres’s ratio of 25.59x is above its peer average of 20.48x, which suggests the stock is trading at a higher price compared to the Auto Components industry. Furthermore, Apollo Tyres’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to more than double over the next couple of years, the future seems bright for Apollo Tyres. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
Are you a shareholder? APOLLOTYRE’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe APOLLOTYRE should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on APOLLOTYRE for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for APOLLOTYRE, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing Apollo Tyres at this point in time. For example - Apollo Tyres has 1 warning sign we think you should be aware of.
If you are no longer interested in Apollo Tyres, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Find out whether Apollo Tyres is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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This article by Simply Wall St 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 account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Apollo Tyres Limited manufactures and sells automotive tires, tubes, and flaps in the Asia Pacific, the Middle East, Africa, Europe, and internationally.
Established dividend payer with adequate balance sheet.
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