Should You Think About Buying DAIHEN Corporation (TSE:6622) Now?

While DAIHEN Corporation (TSE:6622) might not have the largest market cap around , it saw a significant share price rise of 48% in the past couple of months on the TSE. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine DAIHEN’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for DAIHEN

Is DAIHEN Still Cheap?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 14.69x is currently trading slightly above its industry peers’ ratio of 12.52x, which means if you buy DAIHEN today, you’d be paying a relatively reasonable price for it. And if you believe DAIHEN should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Furthermore, DAIHEN’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What does the future of DAIHEN look like?

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. Though in the case of DAIHEN, it is expected to deliver a relatively unexciting earnings growth of 7.5%, 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? It seems like the market has already priced in 6622’s growth outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at 6622? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on 6622, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about DAIHEN as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 3 warning signs with DAIHEN, and understanding them should be part of your investment process.

If you are no longer interested in DAIHEN, 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.