Is There Now An Opportunity In Apollo Tyres Limited (NSE:APOLLOTYRE)?

Stock Analysis

Apollo Tyres Limited (NSE:APOLLOTYRE), is not the largest company out there, but it received a lot of attention from a substantial price increase 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. But what if there is still an opportunity to buy? 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.

Check out our latest analysis for Apollo Tyres

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 23.3x is trading slightly below its industry peers’ ratio of 24.09x, which means if you buy Apollo Tyres today, you’d be paying a reasonable price for it. And if you believe that Apollo Tyres should be trading at this level in the long run, then there's not much of an upside to gain over and above other industry peers. In addition to this, it seems like Apollo Tyres's share price is quite stable, which could mean there may be less chances to buy low in the future now that it's trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

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. Apollo Tyres' earnings over the next few years are expected to increase by 79%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

Are you a shareholder? It seems like the market has already priced in APOLLOTYRE's positive outlook, with shares trading around industry price multiples. 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 APOLLOTYRE? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on APOLLOTYRE, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for APOLLOTYRE, 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.

It can be quite valuable to consider what analysts expect for Apollo Tyres from their most recent forecasts. So feel free to check out our free graph representing analyst forecasts.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.

Flawless balance sheet with solid track record and pays a dividend.