Is There Now An Opportunity In Ushio Inc. (TSE:6925)?

Ushio Inc. (TSE:6925), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the TSE. The recent share price gains has brought the company back closer to its yearly peak. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Ushio’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Ushio

What's The Opportunity In Ushio?

Ushio 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. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Ushio’s ratio of 22.03x is above its peer average of 11.59x, which suggests the stock is trading at a higher price compared to the Electrical industry. Another thing to keep in mind is that Ushio’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.

What does the future of Ushio 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 Ushio, it is expected to deliver a relatively unexciting earnings growth of 9.4%, 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? 6925’s 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 6925 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 6925 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 growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - Ushio has 1 warning sign we think you should be aware of.

If you are no longer interested in Ushio, 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.