What Is HORIBA, Ltd.'s (TSE:6856) Share Price Doing?

HORIBA, Ltd. (TSE:6856), is not the largest company out there, but it saw a decent share price growth of 18% on the TSE over the last few months. While good news for shareholders, the company has traded much higher in the past year. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at HORIBA’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for HORIBA

What's The Opportunity In HORIBA?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 12.7x is currently trading slightly above its industry peers’ ratio of 11.5x, which means if you buy HORIBA today, you’d be paying a relatively reasonable price for it. And if you believe that HORIBA should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, HORIBA’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What kind of growth will HORIBA 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. With profit expected to grow by 36% over the next couple of years, the future seems bright for HORIBA. 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? 6856’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. 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 6856? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on 6856, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 6856, 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, HORIBA has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

If you are no longer interested in HORIBA, 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.