Is Topkey Corporation (TPE:4536) Potentially Undervalued?

Topkey Corporation (TPE:4536), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the TSEC over the last few months, increasing to NT$171 at one point, and dropping to the lows of NT$149. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Topkey's current trading price of NT$156 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Topkey’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Topkey

What is Topkey worth?

According to my valuation model, Topkey seems to be fairly priced at around 10.26% above my intrinsic value, which means if you buy Topkey today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is NT$141.03, there’s only an insignificant downside when the price falls to its real value. What's more, Topkey’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What kind of growth will Topkey 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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Topkey's revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in 4536’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on 4536, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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'd like to know more about Topkey as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 2 warning signs with Topkey, and understanding them should be part of your investment process.

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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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