Is It Time To Consider Buying Merida Industry Co., Ltd. (TWSE:9914)?

Merida Industry Co., Ltd. (TWSE:9914), might not be a large cap stock, but it saw significant share price movement during recent months on the TWSE, rising to highs of NT$184 and falling to the lows of NT$147. 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 Merida Industry's current trading price of NT$151 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 Merida Industry’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

What's The Opportunity In Merida Industry?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 19% below our intrinsic value, which means if you buy Merida Industry today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth NT$185.00, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Merida Industry’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Check out our latest analysis for Merida Industry

What kind of growth will Merida Industry 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. With revenues expected to grow by a double-digit 27% over the next couple of years, the outlook is positive for Merida Industry. If the level of expenses is able to be maintained, 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? 9914’s optimistic future growth appears to have been factored into the current share price, 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 9914, 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.

So while earnings quality is important, it's equally important to consider the risks facing Merida Industry at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Merida Industry.

If you are no longer interested in Merida Industry, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.