MagnaChip Semiconductor Corporation (NYSE:MX), a semiconductor company based in Luxembourg, received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to $12.6 at one point, and dropping to the lows of $9. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether MagnaChip Semiconductor’s current trading price of $9.2 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 MagnaChip Semiconductor’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View our latest analysis for MagnaChip Semiconductor
What’s the opportunity in MagnaChip Semiconductor?
Good news, investors! MagnaChip Semiconductor is still a bargain right now. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that MagnaChip Semiconductor’s ratio of 3.68x is below its peer average of 24.3x, which suggests the stock is undervalued compared to the Semiconductor industry. What’s more interesting is that, MagnaChip Semiconductor’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from MagnaChip Semiconductor?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of MagnaChip Semiconductor, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Although MX is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to MX, 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 tabs on MX for some time, 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 MagnaChip Semiconductor. You can find everything you need to know about MagnaChip Semiconductor in the latest infographic research report. If you are no longer interested in MagnaChip Semiconductor, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.