Stock Valuation: IRB Infrastructure Developers Ltd (532947)

Name of Company Country of Origin/ Exchange Traded Sector Stock Price
IRB INFRASTRUCTURE DEVELOPERS LTD India/
BOM
Industrials – Engineering & Construction – Infrastructure Operations INR197.25
@ 26 Jul 2018
COMPANY PROFILE IRB Infrastructure Developers Ltd is engaged in construction and maintenance of roadways. It is also engaged in real estate development and sale of electricity generated by windmill, hospitality & Airport Infrastructure.

IRB Infrastructure Developers is an infrastructure and construction company. The company organises itself into three segments: road infrastructure, real estate, and others. Road infrastructure, which contributes the vast majority of revenue, manages, operates, and develops road and highway projects. The real estate segment develops real estate assets. The others segment sells wind-generated electricity, and includes operations related to hospitality and airport infrastructure. The company is headquartered in India, and generates all revenue domestically.

Stock Code 532947
Stock Valuation Below

IRB Infrastructure Developers Price to Book

Price to Earnings, Price to Sales and Price to Cash Flow ratios all value a company based on what it is generating (i.e. profits, sales or cash flow). Price to Book ratio is different in that it values a company based on what it owns (i.e. its net assets). This is usually a suitable valuation indicator for a financial institution, which frequently revalues its assets and liabilities, or a company with huge asset base e.g. utilities company.
At the price of INR197.25 as at 26 Jul 2018, Irb Infrastructure Developers Ltd is trading at a Price to Book Ratio of 1.1 times current book value.  This is a 33% discount to its historical average Price to Book Ratio of 1.7 times.
Is the stock undervalued? One should not just look at one indicator to determine the fair value of a stock.
ProThinker believes in using a combination of valuation methods to decide whether a stock is over or undervalued? The five ratios we use are Price to Earnings, Price to Sales, Price to Cash Flow, Price to Book and Dividend Yield. We use multiple methods to value a stock because each has its benefits as well as shortcomings. Price to Earnings and Price to Cash Flow Ratios relate stock price to profitability but are meaningless when the comany has negative earnings or cash flows. Price to Sales Ratio is more stable because sales are never negative. However, this does not tell us whether the company is able to sell profitably. Price to Book Ratio gives us an indication as to how much we are paying for the company’s assets but it is not directly related to the company’s profitability. Dividend Yield cannot be used for companies that are paying little to no dividends.
While it is important to value stocks based on multiple valuation methods, this often leads to differing views on valuation. One indicator may suggest that a stock is overvalued while another suggest that it is undervalued. This does not help an investor who needs to make a definite decision whether to buy, hold or sell the stock. That is why we advocate the use of a Composite Valuation Indicator, which is derived from the best combination of the five indicators above. A Composite Valuation Indicator will give you ONE conclusion on whether a stock is under or over valued.
To find out more about our valuation methodology, click here. 
Source of Data: Charts are from ProThinker Stock Report. Company description, historical financial statements data and price data are from gurufocus.com. Estimates are from gurufocus and/or 4-traders.com – Thomson Reuters.
Disclaimer: This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither ProThinker nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of ProThinker. Copyright(c) 2018. All rights reserved.

 

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