Stock Analysis

At NT$39.80, Is Eson Precision Ind. Co., Ltd. (TPE:5243) Worth Looking At Closely?

TWSE:5243
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Eson Precision Ind. Co., Ltd. (TPE:5243), is not the largest company out there, but it led the TSEC gainers with a relatively large price hike in the past couple of weeks. 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? Today I will analyse the most recent data on Eson Precision Ind’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Eson Precision Ind

What's the opportunity in Eson Precision Ind?

Eson Precision Ind appears to be overvalued by 34% at the moment, based on my discounted cash flow valuation. The stock is currently priced at NT$39.80 on the market compared to my intrinsic value of NT$29.60. This means that the opportunity to buy Eson Precision Ind at a good price has disappeared! Another thing to keep in mind is that Eson Precision Ind’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

Can we expect growth from Eson Precision Ind?

earnings-and-revenue-growth
TSEC:5243 Earnings and Revenue Growth November 24th 2020

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Eson Precision Ind's revenue growth are expected to be in the teens in the upcoming year, 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? 5243’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe 5243 should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. 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 5243 for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for 5243, which means it’s worth diving deeper into other factors 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 Eson Precision Ind at this point in time. For example - Eson Precision Ind has 1 warning sign we think you should be aware of.

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Valuation is complex, but we're here to simplify it.

Discover if Eson Precision Ind might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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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