Should You Think About Buying Koito Manufacturing Co., Ltd. (TSE:7276) Now?

Koito Manufacturing Co., Ltd. (TSE:7276), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the TSE. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. 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 examine Koito Manufacturing’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Koito Manufacturing

What's The Opportunity In Koito Manufacturing?

According to our valuation model, Koito Manufacturing seems to be fairly priced at around 18.53% above our intrinsic value, which means if you buy Koito Manufacturing today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is ¥1894.85, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Koito Manufacturing’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Koito Manufacturing look like?

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 24% over the next couple of years, the future seems bright for Koito Manufacturing. 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? 7276’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 the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on 7276, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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.

If you'd like to know more about Koito Manufacturing as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for Koito Manufacturing and we think they deserve your attention.

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

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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.

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