Is Now The Time To Look At Buying Koryojyuhan Co., Ltd. (TYO:3495)?

While Koryojyuhan Co., Ltd. (TYO:3495) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the JASDAQ. 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 take a look at Koryojyuhan’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Koryojyuhan

What is Koryojyuhan worth?

Great news for investors – Koryojyuhan is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Koryojyuhan’s ratio of 6.4x is below its peer average of 13.38x, which indicates the stock is trading at a lower price compared to the Real Estate industry. What’s more interesting is that, Koryojyuhan’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Koryojyuhan generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with a relatively muted profit growth of 7.1% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Koryojyuhan, at least in the short term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since 3495 is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on 3495 for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 3495. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

So while earnings quality is important, it's equally important to consider the risks facing Koryojyuhan at this point in time. Every company has risks, and we've spotted 3 warning signs for Koryojyuhan you should know about.

If you are no longer interested in Koryojyuhan, 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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