Have Investors Priced In Sigma Designs Inc’s (NASDAQ:SIGM) Growth?
Sigma Designs Inc (NASDAQ:SIGM), a semiconductor company based in United States, saw a decent share price growth in the teens level on the NasdaqGS over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Sigma Designs’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. View our latest analysis for Sigma Designs
Is Sigma Designs still cheap?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that Sigma Designs’s ratio of 2.23x is trading slightly below its industry peers’ ratio of 3.44x, which means if you buy Sigma Designs today, you’d be paying a relatively reasonable price for it. And if you believe Sigma Designs should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, it seems like Sigma Designs’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Sigma Designs generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. In the upcoming year, Sigma Designs’s earnings are expected to increase by 55.81%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? SIGM’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at SIGM? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on SIGM, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for SIGM, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Sigma Designs. You can find everything you need to know about Sigma Designs in the latest infographic research report. If you are no longer interested in Sigma Designs, 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.
