Is Mitsubishi Gas Chemical Company, Inc. (TSE:4182) Potentially Undervalued?

Mitsubishi Gas Chemical Company, Inc. (TSE:4182), 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¥3,137 and falling to the lows of JP¥2,176. 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 Mitsubishi Gas Chemical Company's current trading price of JP¥2,176 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Mitsubishi Gas Chemical Company’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 Mitsubishi Gas Chemical Company

What's The Opportunity In Mitsubishi Gas Chemical Company?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio 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 Mitsubishi Gas Chemical Company’s ratio of 11.22x is trading slightly above its industry peers’ ratio of 10.43x, which means if you buy Mitsubishi Gas Chemical Company today, you’d be paying a relatively reasonable price for it. And if you believe that Mitsubishi Gas Chemical Company should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. In addition to this, it seems like Mitsubishi Gas Chemical Company’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Mitsubishi Gas Chemical Company?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Mitsubishi Gas Chemical Company's earnings over the next few years are expected to increase by 54%, 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 already priced in 4182’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 financial strength of the company. Have these factors changed since the last time you looked at 4182? 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 tabs on 4182, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 4182, 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.

If you want to dive deeper into Mitsubishi Gas Chemical Company, you'd also look into what risks it is currently facing. At Simply Wall St, we found 3 warning signs for Mitsubishi Gas Chemical Company and we think they deserve your attention.

If you are no longer interested in Mitsubishi Gas Chemical Company, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com