Is Fujitsu Limited (TSE:6702) Potentially Undervalued?

Fujitsu Limited (TSE:6702) saw significant share price movement during recent months on the TSE, rising to highs of JP¥3,156 and falling to the lows of JP¥2,677. 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 Fujitsu's current trading price of JP¥2,800 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Fujitsu’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 Fujitsu

What Is Fujitsu Worth?

According to our valuation model, Fujitsu seems to be fairly priced at around 0.96% above our intrinsic value, which means if you buy Fujitsu today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is ¥2772.78, then there isn’t really any room for the share price grow beyond what it’s currently trading. What's more, Fujitsu’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What does the future of Fujitsu 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. Fujitsu's earnings over the next few years are expected to increase by 27%, 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? It seems like the market has already priced in 6702’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. 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 an eye on 6702, now may not be the most advantageous 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 while earnings quality is important, it's equally important to consider the risks facing Fujitsu at this point in time. While conducting our analysis, we found that Fujitsu has 1 warning sign and it would be unwise to ignore this.

If you are no longer interested in Fujitsu, 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.