When Should You Buy Fuji Electric Co., Ltd. (TSE:6504)?

While Fuji Electric Co., Ltd. (TSE:6504) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the TSE over the last few months, increasing to JP¥10,500 at one point, and dropping to the lows of JP¥8,814. 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 Fuji Electric's current trading price of JP¥9,301 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 Fuji Electric’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Fuji Electric

What's The Opportunity In Fuji Electric?

Fuji Electric appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 17.63x is currently well-above the industry average of 12.36x, meaning that it is trading at a more expensive price relative to its peers. In addition to this, it seems like Fuji Electric’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.

What kind of growth will Fuji Electric 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 28% over the next couple of years, the future seems bright for Fuji Electric. 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? 6504’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe 6504 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 an eye on 6504 for a while, 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 positive outlook is encouraging for 6504, 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 Fuji Electric, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Fuji Electric has 1 warning sign and it would be unwise to ignore this.

If you are no longer interested in Fuji Electric, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.