Is Lake Materials Co., Ltd. (KOSDAQ:281740) Potentially Undervalued?

Lake Materials Co., Ltd. (KOSDAQ:281740), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the KOSDAQ over the last few months, increasing to ₩30,650 at one point, and dropping to the lows of ₩18,670. 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 Lake Materials' current trading price of ₩19,140 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 Lake Materials’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Lake Materials

What's The Opportunity In Lake Materials?

Lake Materials appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Lake Materials’s ratio of 52.14x is above its peer average of 15.61x, which suggests the stock is trading at a higher price compared to the Chemicals industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Lake Materials’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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.

Can we expect growth from Lake Materials?

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 revenue expected to more than double in the next few years, the future appears to be extremely bright for Lake Materials. 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? It seems like the market has well and truly priced in A281740’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe A281740 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 A281740 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 A281740, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. You'd be interested to know, that we found 3 warning signs for Lake Materials and you'll want to know about them.

If you are no longer interested in Lake Materials, 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.