Is Micro Digital Co., Ltd. (KOSDAQ:305090) Potentially Undervalued?

Micro Digital Co., Ltd. (KOSDAQ:305090), might not be a large cap stock, but it saw a significant share price rise of 78% in the past couple of months on the KOSDAQ. The recent jump in the share price has meant that the company is trading at close to its 52-week high. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today we will analyse the most recent data on Micro Digital’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Micro Digital

Is Micro Digital Still Cheap?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 8.5% below our intrinsic value, which means if you buy Micro Digital today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth ₩14988.59, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Micro Digital’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Micro Digital?

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 revenue expected to more than double in the next few years, the future appears to be extremely bright for Micro Digital. If expenses can also be maintained, 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? A305090’s optimistic future growth appears to have been factored into the current share price, 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 tabs on A305090, 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 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 - Micro Digital has 3 warning signs we think you should be aware of.

If you are no longer interested in Micro Digital, 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.