Is It Too Late To Consider Buying Zeus Co.,Ltd. (KOSDAQ:079370)?

Zeus Co.,Ltd. (KOSDAQ:079370), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the KOSDAQ. 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? Let’s take a look at ZeusLtd’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for ZeusLtd

What's the opportunity in ZeusLtd?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 22.23x is currently trading slightly above its industry peers’ ratio of 21.16x, which means if you buy ZeusLtd today, you’d be paying a relatively sensible price for it. And if you believe ZeusLtd should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that ZeusLtd’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will ZeusLtd 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. With profit expected to more than double over the next couple of years, the future seems bright for ZeusLtd. 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 already priced in A079370’s positive outlook, 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 A079370? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on A079370, 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 A079370, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into ZeusLtd, you'd also look into what risks it is currently facing. Case in point: We've spotted 2 warning signs for ZeusLtd you should be mindful of and 1 of these makes us a bit uncomfortable.

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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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