When Should You Buy YASKAWA Electric Corporation (TSE:6506)?

YASKAWA Electric Corporation (TSE:6506), might not be a large cap stock, but it saw significant share price movement during recent months on the TSE, rising to highs of JP¥6,335 and falling to the lows of JP¥4,097. 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 YASKAWA Electric's current trading price of JP¥4,411 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 YASKAWA 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 YASKAWA Electric

What's The Opportunity In YASKAWA Electric?

YASKAWA Electric is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison 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 23.91x is currently well-above the industry average of 11.58x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since YASKAWA Electric’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will YASKAWA Electric generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 39% over the next couple of years, the future seems bright for YASKAWA 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? It seems like the market has well and truly priced in 6506’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe 6506 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 6506 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 positive outlook is encouraging for 6506, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Diving deeper into the forecasts for YASKAWA Electric mentioned earlier will help you understand how analysts view the stock going forward. So feel free to check out our free graph representing analyst forecasts.

If you are no longer interested in YASKAWA 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.