When Should You Buy LIXIL Corporation (TSE:5938)?

LIXIL Corporation (TSE:5938), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the TSE over the last few months, increasing to JP¥1,815 at one point, and dropping to the lows of JP¥1,569. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether LIXIL's current trading price of JP¥1,688 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at LIXIL’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for LIXIL

What Is LIXIL Worth?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 6.21% above our intrinsic value, which means if you buy LIXIL today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth ¥1589.23, then there isn’t really any room for the share price grow beyond what it’s currently trading. What's more, LIXIL’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What kind of growth will LIXIL generate?

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. Though in the case of LIXIL, it is expected to deliver a relatively unexciting top-line growth of 8.5% in the next few years, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What This Means For You

Are you a shareholder? 5938’s 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 tabs on 5938, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, LIXIL has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

If you are no longer interested in LIXIL, 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.