’Fasten your seatbelts’— BTIG strategists warn of coming turbulence
As the Nifty Bank index is trading at fairly high levels, it might be a difficult task to spot banks trading at lower than their intrinsic value. However, using the InvestingPro+ powerful screener “Ben Graham Formula” we found a stock that is not just significantly undervalued but also fits the criterion of Benjamin Graham’s formula, who was the guru of legendary investor Warren Buffett.
The company is Bandhan Bank (NS:BANH) Limited which is a midcap private-sector lender with a market capitalization of INR 31,107 crore. The bank has moved against the banking index, especially in the last 3 months, delivering a negative return of 24.5%. This not only makes it available at a good discount to its 52-week high but the RSI (daily, 14) also showed an oversold reading last month.
Image Source: InvestingPro+
Apart from the technical reversal setup, the valuation gap between the CMP and the fair value has increased quite a lot. After analyzing the stock from 4 different financial models, the fair value comes at INR 284.3, which is a healthy upside of 49%.
But what’s more interesting is that the lowest value of the stock (among all 4 models) is INR 263, which is also higher than the CMP of 191. So, even with the most conservative estimate, the stock is decently undervalued, and due to its lower levels, further downside potential seems limited.
There are some red flags as well with the bank which should also be noted. All thanks to ProTips, investors need not dive into the complex financial statements to hunt for these issues. The bank is suffering through weak gross margins, quickly burning cash, etc. but all of that seems to be already priced in. These are the reasons the stock is available at such a good discount to its fair value. Looking at the TTM P/E ratio, it is 10.43, which is almost half the sector’s average of 20.77.
Investors can use many powerful screeners in InvestingPro+ to find potential winners without having to spend countless hours and make their investment journey a breeze. You can avail this limited-time exciting offer for a massive discount of up to 69% by clicking here.
X (formerly, Twitter) - Aayush Khanna