At JP¥1,791, Is It Time To Put FLECT Co., Ltd. (TSE:4414) On Your Watch List?

FLECT Co., Ltd. (TSE:4414), is not the largest company out there, but it saw a decent share price growth of 19% 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. 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 take a look at FLECT’s outlook and value based on the most recent financial data to see if the opportunity still exists.

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Is FLECT Still Cheap?

According to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 FLECT’s ratio of 20.52x is above its peer average of 15.32x, which suggests the stock is trading at a higher price compared to the IT industry. But, is there another opportunity to buy low in the future? Since FLECT’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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.

See our latest analysis for FLECT

Can we expect growth from FLECT?

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. 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. FLECT'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 4414’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe 4414 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 4414 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 4414, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about FLECT as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 2 warning signs for FLECT and you'll want to know about these.

If you are no longer interested in FLECT, 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.