At JP¥2,454, Is It Time To Put M3, Inc. (TSE:2413) On Your Watch List?

Let's talk about the popular M3, Inc. (TSE:2413). The company's shares saw a double-digit share price rise of over 10% 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 large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine M3’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

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What Is M3 Worth?

M3 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 M3’s ratio of 36.22x is above its peer average of 19.8x, which suggests the stock is trading at a higher price compared to the Healthcare Services industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that M3’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Check out our latest analysis for M3

Can we expect growth from M3?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. M3's earnings over the next few years are expected to increase by 51%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in 2413’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe 2413 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 2413 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 optimistic prospect is encouraging for 2413, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into M3, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for M3 and we think they deserve your attention.

If you are no longer interested in M3, 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.