At JP¥1,650, Is MITSUI E&S Co., Ltd. (TSE:7003) Worth Looking At Closely?

While MITSUI E&S Co., Ltd. (TSE:7003) might not have the largest market cap around , it saw a significant share price rise of 50% in the past couple of months on the TSE. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine MITSUI E&S’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for MITSUI E&S

Is MITSUI E&S Still Cheap?

According to our valuation model, MITSUI E&S seems to be fairly priced at around 9.7% below our intrinsic value, which means if you buy MITSUI E&S today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth ¥1827.53, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because MITSUI E&S’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from MITSUI E&S?

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. Though in the case of MITSUI E&S, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? 7003 seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on 7003 for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on 7003 should the price fluctuate below its true value.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. At Simply Wall St, we found 4 warning signs for MITSUI E&S and we think they deserve your attention.

If you are no longer interested in MITSUI E&S, 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.