Should You Investigate Persol Holdings Co.,Ltd. (TSE:2181) At JP¥263?

Persol Holdings Co.,Ltd. (TSE:2181), is not the largest company out there, but it received a lot of attention from a substantial price increase on the TSE over the last few months. The recent share price gains has brought the company back closer to its yearly peak. As a mid-cap 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? Today we will analyse the most recent data on Persol HoldingsLtd’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Persol HoldingsLtd

What's The Opportunity In Persol HoldingsLtd?

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. 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 Persol HoldingsLtd’s ratio of 17.53x is trading slightly above its industry peers’ ratio of 17.25x, which means if you buy Persol HoldingsLtd today, you’d be paying a relatively sensible price for it. And if you believe Persol HoldingsLtd 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. Although, there may be an opportunity to buy in the future. This is because Persol HoldingsLtd’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.

What does the future of Persol HoldingsLtd look like?

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 39% over the next couple of years, the future seems bright for Persol HoldingsLtd. 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 already priced in 2181’s positive 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 2181? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on 2181, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 2181, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Persol HoldingsLtd has 1 warning sign we think you should be aware of.

If you are no longer interested in Persol HoldingsLtd, 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.