What Does Meiko Electronics Co., Ltd.'s (TYO:6787) Share Price Indicate?

Meiko Electronics Co., Ltd. (TYO:6787), might not be a large cap stock, but it saw significant share price movement during recent months on the JASDAQ, rising to highs of JP¥2,150 and falling to the lows of JP¥1,780. 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 Meiko Electronics' current trading price of JP¥1,904 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 Meiko Electronics’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Meiko Electronics

Is Meiko Electronics still cheap?

The stock is currently trading at JP¥1,904 on the share market, which means it is overvalued by 36% compared to my intrinsic value of ¥1404.91. This means that the opportunity to buy Meiko Electronics at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Meiko Electronics’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Meiko Electronics generate?

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. 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. With profit expected to more than double over the next couple of years, the future seems bright for Meiko Electronics. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in 6787’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe 6787 should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 6787 for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for 6787, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Be aware that Meiko Electronics is showing 3 warning signs in our investment analysis and 1 of those shouldn't be ignored...

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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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