At JP¥898, Is It Time To Put FRONTEO, Inc. (TSE:2158) On Your Watch List?

While FRONTEO, Inc. (TSE:2158) might not have the largest market cap around , it led the TSE gainers with a relatively large price hike in the past couple of weeks. 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? Let’s examine FRONTEO’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

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What Is FRONTEO Worth?

According to our valuation model, FRONTEO seems to be fairly priced at around 17.88% above our intrinsic value, which means if you buy FRONTEO today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is ¥761.76, there’s only an insignificant downside when the price falls to its real value. In addition to this, FRONTEO has a low beta, which suggests its share price is less volatile than the wider market.

View our latest analysis for FRONTEO

Can we expect growth from FRONTEO?

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. FRONTEO'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? 2158’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 confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on 2158, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 2 warning signs for FRONTEO (of which 1 is a bit unpleasant!) you should know about.

If you are no longer interested in FRONTEO, 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.