At JP¥2,106, Is It Time To Put Renesas Electronics Corporation (TSE:6723) On Your Watch List?

Today we're going to take a look at the well-established Renesas Electronics Corporation (TSE:6723). The company's stock saw a decent share price growth of 13% on the TSE over the last few months. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Renesas Electronics’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Renesas Electronics

What's The Opportunity In Renesas Electronics?

The share price seems sensible at the moment according to our price multiple model, where we compare 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 Renesas Electronics’s ratio of 13.42x is trading slightly below its industry peers’ ratio of 15.33x, which means if you buy Renesas Electronics today, you’d be paying a decent price for it. And if you believe that Renesas Electronics should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Is there another opportunity to buy low in the future? Since Renesas Electronics’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.

What kind of growth will Renesas Electronics 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. Renesas Electronics' earnings over the next few years are expected to increase by 34%, 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? It seems like the market has already priced in 6723’s positive outlook, 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 6723? 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 tabs on 6723, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 6723, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Renesas Electronics has 1 warning sign we think you should be aware of.

If you are no longer interested in Renesas Electronics, 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.