When Should You Buy Shin-Etsu Chemical Co., Ltd. (TSE:4063)?

Today we're going to take a look at the well-established Shin-Etsu Chemical Co., Ltd. (TSE:4063). The company's stock received a lot of attention from a substantial price movement on the TSE over the last few months, increasing to JP¥5,195 at one point, and dropping to the lows of JP¥3,549. 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¥3,800 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.

We've discovered 1 warning sign about Shin-Etsu Chemical. View them for free.

What's The Opportunity In Shin-Etsu Chemical?

Shin-Etsu Chemical appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 Shin-Etsu Chemical’s ratio of 13.77x is above its peer average of 10.26x, which suggests the stock is trading at a higher price compared to the Chemicals industry. But, is there another opportunity to buy low in the future? Given that Shin-Etsu Chemical’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.

View our latest analysis for Shin-Etsu Chemical

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. Shin-Etsu Chemical's earnings over the next few years are expected to increase by 33%, 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 4063’s positive outlook, 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 an eye on 4063 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 4063, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Shin-Etsu Chemical, and understanding this should be part of your investment process.

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.