Is Samsung Electro-Mechanics Co., Ltd. (KRX:009150) Potentially Undervalued?

Let's talk about the popular Samsung Electro-Mechanics Co., Ltd. (KRX:009150). The company's shares saw a decent share price growth in the teens level on the KOSE over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today I will analyse the most recent data on Samsung Electro-Mechanics’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Samsung Electro-Mechanics

What is Samsung Electro-Mechanics worth?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to 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 24.72x is currently trading slightly below its industry peers’ ratio of 25.03x, which means if you buy Samsung Electro-Mechanics today, you’d be paying a reasonable price for it. And if you believe that Samsung Electro-Mechanics should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, Samsung Electro-Mechanics’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

Can we expect growth from Samsung Electro-Mechanics?

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 grow by 73% over the next couple of years, the future seems bright for Samsung Electro-Mechanics. 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? A009150’s optimistic future growth appears to have been factored into the current share price, 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 A009150? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on A009150, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for A009150, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. While conducting our analysis, we found that Samsung Electro-Mechanics has 1 warning sign and it would be unwise to ignore this.

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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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