At JP¥860, Is It Time To Put Nireco Corporation (TYO:6863) On Your Watch List?

While Nireco Corporation (TYO:6863) 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 Nireco’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Nireco

What's the opportunity in Nireco?

Good news, investors! Nireco is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. 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 Nireco’s ratio of 9.25x is below its peer average of 15.92x, which indicates the stock is trading at a lower price compared to the Machinery industry. What’s more interesting is that, Nireco’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 Nireco look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 3.0% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Nireco, at least in the short term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since 6863 is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on 6863 for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 6863. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example - Nireco has 2 warning signs we think you should be aware of.

If you are no longer interested in Nireco, 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. 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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