At AU$1.26, Is Japara Healthcare Limited (ASX:JHC) Worth Looking At Closely?

Japara Healthcare Limited (ASX:JHC), which is in the healthcare business, and is based in Australia, saw a decent share price growth in the teens level on the ASX over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today I will analyse the most recent data on Japara Healthcare’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Japara Healthcare

What's the opportunity in Japara Healthcare?

The stock seems fairly valued at the moment according to my relative valuation model. I’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 14.35x is currently trading slightly below its industry peers’ ratio of 18x, which means if you buy Japara Healthcare today, you’d be paying a reasonable price for it. And if you believe Japara Healthcare should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. Is there another opportunity to buy low in the future? Since Japara Healthcare’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Japara Healthcare?

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. With profit expected to grow by a double-digit 16% over the next couple of years, the outlook is positive for Japara Healthcare. 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? JHC’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at JHC? Will you have enough conviction to buy should the price fluctuate below the true value?

Are you a potential investor? If you’ve been keeping tabs on JHC, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for JHC, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Japara Healthcare. You can find everything you need to know about Japara Healthcare in the latest infographic research report. If you are no longer interested in Japara Healthcare, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.