What Does Toto Ltd.'s (TSE:5332) Share Price Indicate?

Toto Ltd. (TSE:5332), might not be a large cap stock, but it saw a decent share price growth of 19% on the TSE over the last few months. The company is inching closer to its yearly highs following the recent share price climb. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine Toto’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Toto

What's The Opportunity In Toto?

According to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. We’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 25.22x is currently well-above the industry average of 13.29x, meaning that it is trading at a more expensive price relative to its peers. In addition to this, it seems like Toto’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Toto?

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. Toto's earnings over the next few years are expected to increase by 57%, 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? It seems like the market has well and truly priced in 5332’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe 5332 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on 5332 for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for 5332, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Toto, you'd also look into what risks it is currently facing. Case in point: We've spotted 2 warning signs for Toto you should be aware of.

If you are no longer interested in Toto, 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.