Is It Too Late To Consider Buying Santec Corporation (TYO:6777)?

Santec Corporation (TYO:6777), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the JASDAQ over the last few months, increasing to JP¥2,085 at one point, and dropping to the lows of JP¥1,707. 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 Santec's current trading price of JP¥1,707 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 Santec’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 Santec

What's the opportunity in Santec?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 3.4% below my intrinsic value, which means if you buy Santec today, you’d be paying a fair price for it. And if you believe the company’s true value is ¥1767.23, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Santec’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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.

What kind of growth will Santec 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. Santec's earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to 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 6777’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 conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on 6777, 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 1 warning sign for Santec 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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