What Does Osaka Yuka Industry Ltd.'s (TYO:4124) Share Price Indicate?

While Osaka Yuka Industry Ltd. (TYO:4124) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the JASDAQ over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Osaka Yuka Industry’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Osaka Yuka Industry

What is Osaka Yuka Industry worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Osaka Yuka Industry’s ratio of 16.91x is trading slightly above its industry peers’ ratio of 16.27x, which means if you buy Osaka Yuka Industry today, you’d be paying a relatively sensible price for it. And if you believe Osaka Yuka Industry should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Osaka Yuka Industry’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.

What does the future of Osaka Yuka Industry look like?

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. Osaka Yuka Industry's earnings over the next few years are expected to increase by 53%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? 4124’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at 4124? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on 4124, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 4124, 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.

If you'd like to know more about Osaka Yuka Industry as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 3 warning signs for Osaka Yuka Industry you should be aware of.

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This article by Simply Wall St is general in nature. 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.
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