Is There Now An Opportunity In Ferrotec Holdings Corporation (TSE:6890)?

While Ferrotec Holdings Corporation (TSE:6890) might not have the largest market cap around , it saw a significant share price rise of 28% in the past couple of months on the TSE. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine Ferrotec Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Ferrotec Holdings

Is Ferrotec Holdings Still Cheap?

Great news for investors – Ferrotec Holdings is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio 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 6.65x is currently well-below the industry average of 15.56x, meaning that it is trading at a cheaper price relative to its peers. However, given that Ferrotec Holdings’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 Ferrotec Holdings look like?

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. With profit expected to grow by 44% over the next couple of years, the future seems bright for Ferrotec Holdings. 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? Since 6890 is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on 6890 for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 6890. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

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. While conducting our analysis, we found that Ferrotec Holdings has 3 warning signs and it would be unwise to ignore these.

If you are no longer interested in Ferrotec Holdings, 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.