Should You Investigate Lake Materials Co., Ltd. (KOSDAQ:281740) At ₩17,250?

Lake Materials Co., Ltd. (KOSDAQ:281740), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the KOSDAQ over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. 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 examine Lake Materials’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

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 55.91x is above its peer average of 11.72x, 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.

What kind of growth will Lake Materials 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. 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. With profit expected to grow by a double-digit 19% in the upcoming year, the short-term outlook is positive for Lake Materials. 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. However, this brings up another question – is now the right time to 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 optimistic prospect is encouraging for A281740, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Lake Materials, you'd also look into what risks it is currently facing. For example, Lake Materials has 3 warning signs (and 2 which are potentially serious) we think you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.