Why Fujikura Ltd. (TSE:5803) Could Be Worth Watching

While Fujikura Ltd. (TSE:5803) might not have the largest market cap around , it saw a significant share price rise of 91% in the past couple of months on the TSE. The recent jump in the share price has meant that the company is trading at close to its 52-week high. 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. However, could the stock still be trading at a relatively cheap price? Let’s examine Fujikura’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Fujikura

Is Fujikura Still Cheap?

According to our valuation model, Fujikura seems to be fairly priced at around 11.30% above our intrinsic value, which means if you buy Fujikura today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth ¥3000.94, 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 Fujikura’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 kind of growth will Fujikura generate?

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. With profit expected to grow by a double-digit 20% over the next couple of years, the outlook is positive for Fujikura. 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? 5803’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 financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on 5803, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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.

So while earnings quality is important, it's equally important to consider the risks facing Fujikura at this point in time. You'd be interested to know, that we found 1 warning sign for Fujikura and you'll want to know about this.

If you are no longer interested in Fujikura, 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.