Should You Investigate C.I. Medical Co.,Ltd. (TYO:3540) At JP¥5,450?

While C.I. Medical Co.,Ltd. (TYO:3540) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the JASDAQ over the last few months, increasing to JP¥7,000 at one point, and dropping to the lows of JP¥5,070. 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 C.I. MedicalLtd's current trading price of JP¥5,450 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at C.I. MedicalLtd’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 C.I. MedicalLtd

What's the opportunity in C.I. MedicalLtd?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 18.66x is currently trading slightly below its industry peers’ ratio of 21.46x, which means if you buy C.I. MedicalLtd today, you’d be paying a reasonable price for it. And if you believe C.I. MedicalLtd should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since C.I. MedicalLtd’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from C.I. MedicalLtd?

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. With profit expected to grow by 29% over the next couple of years, the future seems bright for C.I. MedicalLtd. 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? 3540’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 3540? 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 an eye on 3540, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 3540, 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 C.I. MedicalLtd, you'd also look into what risks it is currently facing. While conducting our analysis, we found that C.I. MedicalLtd has 1 warning sign and it would be unwise to ignore it.

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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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