When Should You Buy SEIKOH GIKEN Co., Ltd. (TYO:6834)?

SEIKOH GIKEN Co., Ltd. (TYO:6834), is not the largest company out there, but it received a lot of attention from a substantial price increase on the JASDAQ over the last few months. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at SEIKOH GIKEN’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for SEIKOH GIKEN

Is SEIKOH GIKEN still cheap?

SEIKOH GIKEN is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that SEIKOH GIKEN’s ratio of 28.06x is above its peer average of 18.58x, which suggests the stock is trading at a higher price compared to the Electronic industry. But, is there another opportunity to buy low in the future? Given that SEIKOH GIKEN’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.

Can we expect growth from SEIKOH GIKEN?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. SEIKOH GIKEN's earnings over the next few years are expected to increase by 59%, 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? 6834’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe 6834 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 6834 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 positive outlook is encouraging for 6834, 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 SEIKOH GIKEN as a business, it's important to be aware of any risks it's facing. For example - SEIKOH GIKEN has 3 warning signs we think 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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