Is It Time To Consider Buying Taiheiyo Cement Corporation (TSE:5233)?

Taiheiyo Cement Corporation (TSE:5233), might not be a large cap stock, but it saw significant share price movement during recent months on the TSE, rising to highs of JP¥4,210 and falling to the lows of JP¥3,064. 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 Taiheiyo Cement's current trading price of JP¥3,315 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 Taiheiyo Cement’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 Taiheiyo Cement

Is Taiheiyo Cement Still Cheap?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Taiheiyo Cement’s ratio of 8.85x is trading slightly below its industry peers’ ratio of 8.85x, which means if you buy Taiheiyo Cement today, you’d be paying a decent price for it. And if you believe that Taiheiyo Cement should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. In addition to this, it seems like Taiheiyo Cement’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.

What does the future of Taiheiyo Cement look like?

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. 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. With profit expected to grow by 64% over the next couple of years, the future seems bright for Taiheiyo Cement. 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? 5233’s optimistic future growth appears to have been factored into the current share price, 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 5233? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on 5233, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 5233, 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'd like to know more about Taiheiyo Cement as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Taiheiyo Cement, and understanding this should be part of your investment process.

If you are no longer interested in Taiheiyo Cement, 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.