What Is Oricon Inc.'s (TYO:4800) Share Price Doing?

Oricon Inc. (TYO:4800), is not the largest company out there, but it led the JASDAQ gainers with a relatively large price hike in the past couple of weeks. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Oricon’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Oricon

What is Oricon worth?

According to my valuation model, Oricon seems to be fairly priced at around 12.85% above my intrinsic value, which means if you buy Oricon today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth ¥1126.23, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Oricon’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Oricon?

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. With profit expected to grow by 32% over the next couple of years, the future seems bright for Oricon. 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? It seems like the market has already priced in 4800’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on 4800, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining 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 Oricon, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Oricon has 2 warning signs and it would be unwise to ignore these.

If you are no longer interested in Oricon, 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. 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.
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