Is It Time To Consider Buying Posco Dx Company Ltd. (KRX:022100)?

Posco Dx Company Ltd. (KRX:022100), is not the largest company out there, but it saw a significant share price rise of 36% in the past couple of months on the KOSE. While good news for shareholders, the company has traded much higher in the past year. As a ₩3.7t market-cap stock, it seems odd Posco Dx is not more well-covered by analysts. Although, there is more of an opportunity for mispricing in stocks with low coverage, 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 Posco Dx’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

What Is Posco Dx Worth?

Posco Dx is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. We’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 41.73x is currently well-above the industry average of 13.24x, 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 Posco Dx’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.

See our latest analysis for Posco Dx

What does the future of Posco Dx look like?

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. Though in the case of Posco Dx, it is expected to deliver a negative earnings growth of -16%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? If you believe A022100 is currently trading above its peers, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to reduce your total portfolio risk. 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 A022100 for a while, now may not be the best time to enter into the stock. Its price has risen beyond its industry peers, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?

So while earnings quality is important, it's equally important to consider the risks facing Posco Dx at this point in time. To help with this, we've discovered 2 warning signs (1 is a bit unpleasant!) that you ought to be aware of before buying any shares in Posco Dx.

If you are no longer interested in Posco Dx, 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.