Is Universal Entertainment Corporation (TSE:6425) Potentially Undervalued?

Universal Entertainment Corporation (TSE:6425), is not the largest company out there, but it saw significant share price movement during recent months on the TSE, rising to highs of JP¥2,400 and falling to the lows of JP¥1,785. 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 Universal Entertainment's current trading price of JP¥1,927 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Universal Entertainment’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Universal Entertainment

Is Universal Entertainment Still Cheap?

Great news for investors – Universal Entertainment is still trading at a fairly cheap price. Our valuation model shows that the intrinsic value for the stock is ¥3056.90, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Although, there may be another chance to buy again in the future. This is because Universal Entertainment’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 kind of growth will Universal Entertainment generate?

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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Universal Entertainment, at least in the near future.

What This Means For You

Are you a shareholder? Although 6425 is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to 6425, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on 6425 for a while, but hesitant on making the leap, we recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've found that Universal Entertainment has 2 warning signs (1 shouldn't be ignored!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Universal Entertainment, 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.