Is It Time To Consider Buying Hitachi Construction Machinery Co., Ltd. (TSE:6305)?

Hitachi Construction Machinery Co., Ltd. (TSE:6305), 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¥4,839 at one point, and dropping to the lows of JP¥4,123. 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 Hitachi Construction Machinery's current trading price of JP¥4,123 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 Hitachi Construction Machinery’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 Hitachi Construction Machinery

What Is Hitachi Construction Machinery Worth?

Good news, investors! Hitachi Construction Machinery is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. 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 8.34x is currently well-below the industry average of 12.97x, meaning that it is trading at a cheaper price relative to its peers. However, given that Hitachi Construction Machinery’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Hitachi Construction Machinery 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. With profit expected to grow by a double-digit 13% over the next couple of years, the outlook is positive for Hitachi Construction Machinery. 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? Since 6305 is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. 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 6305 for a while, now might be the time to make a leap. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 6305. 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 investment decision.

If you'd like to know more about Hitachi Construction Machinery as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 2 warning signs we've spotted with Hitachi Construction Machinery (including 1 which makes us a bit uncomfortable).

If you are no longer interested in Hitachi Construction Machinery, 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.