While not the largest company on the market, HORIBA, Ltd. (TSE:6856) has seen a decent 18% share price increase on the TSE over the past few months. While that’s good news for shareholders, the company has traded significantly higher over the past year. Since it’s a mid-cap stock with high analyst coverage, one might assume that any recent changes in the company’s outlook are already priced into the price. But what if the stock is still a bargain? Let’s take a look at HORIBA’s outlook and value based on the latest financial data to see if the opportunity still exists.
Check out our latest analysis for HORIBA
What opportunities are available at HORIBA?
The share price currently appears reasonable according to our price multiple model, where we compare the company’s price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this case because there isn’t enough transparency to predict cash flows. The stock’s 12.7x ratio is currently slightly higher than industry peers’ 11.5x ratio, meaning that if you buy HORIBA today, you’d be paying a relatively reasonable price for it. And if you believe HORIBA should trade at these levels over the long term, then there should be fairly insignificant downside risk compared to other industry peers. Furthermore, HORIBA’s share price appears to be relatively stable compared to the rest of the market, as shown by its low beta. This could mean that the stock is less likely to fall further due to natural market volatility, suggesting there will be fewer buying opportunities in the future.
What kind of growth will HORIBA generate?
Investors seeking growth in their portfolio should consider a company’s prospects before buying its shares. Although value investors would argue that intrinsic value relative to price is most important, high growth potential at a cheap price would be a more compelling investment thesis. With earnings expected to grow 36% over the next few years, the future looks bright for HORIBA. It looks like the stock is headed for higher cash flow, which should lead to a higher share valuation.
What this means for you
Are you a shareholder? 6856’s optimistic future growth seems to be factored into the current share price, as shares trade around industry price multiples. However, there are other important factors that we have not considered today, such as the company’s financial strength. Have these factors changed since you last covered 6856? Will you have enough confidence to invest in the company if the price falls below the industry P/E?
Are you a potential investor? If you’ve been keeping an eye on 6856, now may not be the best time to buy, with the stock trading around industry price multiples. However, the positive outlook for 6856 is encouraging, meaning it’s worth taking a closer look at other factors such as the strength of its balance sheet in order to take advantage of the next price dip.
With this in mind, we would not consider investing in a stock if we did not know the risks. HORIBA, for example, has 2 warning signs (and 1 that makes us a little uncomfortable) that we think you should know about.
If you are no longer interested in HORIBA, you can view our list of over 50 other stocks with high growth potential on our free platform.
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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.
