At JP¥6,820, Is It Time To Put Shibaura Mechatronics Corporation (TSE:6590) On Your Watch List?

While Shibaura Mechatronics Corporation (TSE:6590) might not have the largest market cap around , it saw a double-digit share price rise of over 10% in the past couple of months on the TSE. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today we will analyse the most recent data on Shibaura Mechatronics’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Shibaura Mechatronics

What's The Opportunity In Shibaura Mechatronics?

Good news, investors! Shibaura Mechatronics is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. 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 Shibaura Mechatronics’s ratio of 9.84x is below its peer average of 21.55x, which indicates the stock is trading at a lower price compared to the Semiconductor industry. However, given that Shibaura Mechatronics’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Shibaura Mechatronics?

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. Though in the case of Shibaura Mechatronics, it is expected to deliver a negative earnings growth of -10%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Although 6590 is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to 6590, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on 6590 for a while, but hesitant on making the leap, we recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Be aware that Shibaura Mechatronics is showing 3 warning signs in our investment analysis and 2 of those shouldn't be ignored...

If you are no longer interested in Shibaura Mechatronics, 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.