Is Now An Opportune Moment To Examine ZOZO, Inc. (TSE:3092)?

Today we're going to take a look at the well-established ZOZO, Inc. (TSE:3092). The company's stock received a lot of attention from a substantial price increase on the TSE over the last few months. The company is now trading at yearly-high levels following the recent surge in its share price. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at ZOZO’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for ZOZO

Is ZOZO Still Cheap?

According to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 ZOZO’s ratio of 32.85x is above its peer average of 13.3x, which suggests the stock is trading at a higher price compared to the Specialty Retail industry. Furthermore, ZOZO’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

Can we expect growth from ZOZO?

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. ZOZO's earnings over the next few years are expected to increase by 23%, 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? 3092’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe 3092 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on 3092 for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for 3092, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into ZOZO, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with ZOZO, and understanding it should be part of your investment process.

If you are no longer interested in ZOZO, 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.