Is Now An Opportune Moment To Examine Newgen Software Technologies Limited (NSE:NEWGEN)?

Simply Wall St · 10/15 01:36

Newgen Software Technologies Limited (NSE:NEWGEN), is not the largest company out there, but it saw a significant share price rise of 43% in the past couple of months on the NSEI. While good news for shareholders, the company has traded much higher in the past year. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on Newgen Software Technologies’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Newgen Software Technologies

Is Newgen Software Technologies Still Cheap?

Newgen Software Technologies is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. We’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 70.25x is currently well-above the industry average of 36.2x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Given that Newgen Software Technologies’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 Newgen Software Technologies look like?

earnings-and-revenue-growth
NSEI:NEWGEN Earnings and Revenue Growth October 15th 2024

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. 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. With profit expected to grow by 59% over the next couple of years, the future seems bright for Newgen Software Technologies. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in NEWGEN’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe NEWGEN 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 tabs on NEWGEN for some time, 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 optimistic prospect is encouraging for NEWGEN, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. You'd be interested to know, that we found 1 warning sign for Newgen Software Technologies and you'll want to know about this.

If you are no longer interested in Newgen Software Technologies, you can use our free platform to see our list of over 50 other stocks with a high growth potential.