The broader markets did recover from the lows on Thursday, with the benchmark Nifty 50 index gaining over 118 points to 22,525, by 1:50 PM IST. With investors’ risk appetite coming back the small and mid-cap spaces are gaining traction and one such counter is Magnum Ventures Limited.
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It engages in the manufacturing and trading of paper products in India and has a market capitalization of a mere INR 335 crore. As the first line of the check, we see the financial health score of the company in InvestingPro, which is 4 out of 5. Any stock that fails to get a rating of 3 should not be included in the portfolio from the fundamental point of view. A rating of 4 is close to excellent, building confidence in further analysis.
The stock is up 4.2% to INR 59.5, as of writing and has gained 30.2% in the last one month, which clearly translates into a strong momentum. However, we should also see the valuation gap left after such a rally for which the fair value feature comes in handy.
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In this case, the stock has a fair value of INR 73.9 per share, which is a very healthy upside potential of 24.3%. Despite a good rally, investors still have a good profit potential on the cards from the CMP, making it a good option for momentum players. Had the valuation gap been less than 10% we might have given it a second thought to make any investment decision. Also, looking at ProTips, investors can see the highlights - Low P/E and P/B valuations.
That is how a strong momentum strategy can be blended with valuation to arrive at a more realistic and rounded approach.
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X (formerly, Twitter) - Aayush Khanna