While SKC Co., Ltd. (KRX:011790) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the KOSE over the last few months. 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, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on SKC’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for SKC
What's the opportunity in SKC?
SKC appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. I’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 23.14x is currently well-above the industry average of 13.52x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Given that SKC’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.
What kind of growth will SKC generate?
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. SKC's earnings over the next few years are expected to increase by 34%, 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? It seems like the market has well and truly priced in A011790’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 A011790 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 an eye on A011790 for a while, 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 A011790, 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 SKC, you'd also look into what risks it is currently facing. To help with this, we've discovered 3 warning signs (1 is significant!) that you ought to be aware of before buying any shares in SKC.
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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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About KOSE:A011790
SKC
Manufactures and sells basic chemical raw materials and copper foils for batteries.
High growth potential very low.
