What Is Shin-Etsu Chemical Co., Ltd.'s (TSE:4063) Share Price Doing?

Shin-Etsu Chemical Co., Ltd. (TSE:4063) saw significant share price movement during recent months on the TSE, rising to highs of JP¥6,874 and falling to the lows of JP¥5,651. 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 Shin-Etsu Chemical's current trading price of JP¥6,208 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Shin-Etsu Chemical’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 Shin-Etsu Chemical

Is Shin-Etsu Chemical Still Cheap?

Shin-Etsu Chemical 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. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 23.1x is currently well-above the industry average of 14.17x, meaning that it is trading at a more expensive price relative to its peers. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Shin-Etsu Chemical’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Shin-Etsu Chemical generate?

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. With profit expected to grow by 31% over the next couple of years, the future seems bright for Shin-Etsu Chemical. 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? 4063’s optimistic 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 4063 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 tabs on 4063 for some time, 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 outlook is encouraging for 4063, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Since timing is quite important when it comes to individual stock picking, it's worth taking a look at what those latest analysts forecasts are. So feel free to check out our free graph representing analyst forecasts.

If you are no longer interested in Shin-Etsu Chemical, 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.