When Should You Buy LAC Co., Ltd. (TYO:3857)?

LAC Co., Ltd. (TYO:3857), is not the largest company out there, but it saw significant share price movement during recent months on the JASDAQ, rising to highs of JP¥1,122 and falling to the lows of JP¥1,007. 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 LAC's current trading price of JP¥1,088 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 LAC’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for LAC

Is LAC still cheap?

According to my valuation model, LAC seems to be fairly priced at around 17% below my intrinsic value, which means if you buy LAC today, you’d be paying a reasonable price for it. And if you believe the company’s true value is ¥1312.87, then there’s not much of an upside to gain from mispricing. What's more, LAC’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What kind of growth will LAC generate?

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. LAC's earnings over the next few years are expected to increase by 30%, 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? 3857’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on 3857, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 2 warning signs for LAC you should be aware of.

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This article by Simply Wall St is general in nature. 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.
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