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When Should You Buy Advanced Energy Industries, Inc. (NASDAQ:AEIS)?

Simply Wall St

Advanced Energy Industries, Inc. (NASDAQ:AEIS), which is in the semiconductor business, and is based in United States, saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Advanced Energy Industries’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Advanced Energy Industries

Is Advanced Energy Industries still cheap?

Good news, investors! Advanced Energy Industries is still a bargain right now. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Advanced Energy Industries’s ratio of 22.12x is below its peer average of 27.49x, which suggests the stock is undervalued compared to the Semiconductor industry. However, given that Advanced Energy Industries’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Advanced Energy Industries look like?

NasdaqGS:AEIS Past and Future Earnings, September 5th 2019

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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -5.3% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Advanced Energy Industries. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although AEIS is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to AEIS, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on AEIS for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Advanced Energy Industries. You can find everything you need to know about Advanced Energy Industries in the latest infographic research report. If you are no longer interested in Advanced Energy Industries, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.