Is It Too Late To Consider Buying Micronics Japan Co., Ltd. (TSE:6871)?

Micronics Japan Co., Ltd. (TSE:6871), might not be a large cap stock, but it saw significant share price movement during recent months on the TSE, rising to highs of JP¥7,440 and falling to the lows of JP¥3,760. 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 Micronics Japan's current trading price of JP¥3,760 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 Micronics Japan’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 Micronics Japan

What's The Opportunity In Micronics Japan?

Micronics Japan is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. We’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 21.76x is currently well-above the industry average of 15.73x, meaning that it is trading at a more expensive price relative to its peers. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Micronics Japan’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.

What does the future of Micronics Japan look like?

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. Micronics Japan's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in 6871’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe 6871 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 tabs on 6871 for some time, 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 6871, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. You'd be interested to know, that we found 1 warning sign for Micronics Japan and you'll want to know about it.

If you are no longer interested in Micronics Japan, 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.