Is It Too Late To Consider Buying Toumei Co.,Ltd. (TSE:4439)?

Simply Wall St · 10/16 22:51

Toumei Co.,Ltd. (TSE:4439), might not be a large cap stock, but it saw a significant share price rise of 55% in the past couple of months on the TSE. The company is inching closer to its yearly highs following the recent share price climb. 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 we will analyse the most recent data on ToumeiLtd’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for ToumeiLtd

What's The Opportunity In ToumeiLtd?

ToumeiLtd appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that ToumeiLtd’s ratio of 23.58x is above its peer average of 13.98x, which suggests the stock is trading at a higher price compared to the Telecom industry. Another thing to keep in mind is that ToumeiLtd’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers 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 for it to fall back down into an attractive buying range again.

What kind of growth will ToumeiLtd generate?

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TSE:4439 Earnings and Revenue Growth October 16th 2024

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 profit expected to grow by 63% over the next couple of years, the future seems bright for ToumeiLtd. 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? 4439’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe 4439 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 4439 for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for 4439, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Diving deeper into the forecasts for ToumeiLtd mentioned earlier will help you understand how analysts view the stock going forward. Luckily, you can check out what analysts are forecasting by clicking here.

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