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Silicon Motion Technology Corporation (NASDAQ:SIMO), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine Silicon Motion Technology’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in Silicon Motion Technology?
Good news, investors! Silicon Motion Technology is still a bargain right now. According to my valuation, the intrinsic value for the stock is $59.32, but it is currently trading at US$44.92 on the share market, meaning that there is still an opportunity to buy now. However, given that Silicon Motion Technology’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 Silicon Motion Technology look like?
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 Silicon Motion Technology, it is expected to deliver a relatively unexciting earnings growth of 3.8%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since SIMO is currently undervalued, it may be a great time to increase your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on SIMO for a while, now might be the time to make a leap. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy SIMO. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.
If you'd like to know more about Silicon Motion Technology as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Silicon Motion Technology, and understanding it should be part of your investment process.
If you are no longer interested in Silicon Motion Technology, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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