CEVA, Inc. (NASDAQ:CEVA), which is in the semiconductor business, and is based in United States, saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$32.82 and falling to the lows of US$25.49. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether CEVA's current trading price of US$25.63 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 CEVA’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in CEVA?
According to my valuation model, the stock is currently overvalued by about 29%, trading at US$25.63 compared to my intrinsic value of $19.92. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Given that CEVA’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 kind of growth will CEVA generate?
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. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for CEVA, at least in the near future.
What this means for you:
Are you a shareholder? If you believe CEVA should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to reduce your total portfolio risk. 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 tabs on CEVA for some time, now may not be the best time to enter into the stock. Price climbed passed its true value, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on CEVA. You can find everything you need to know about CEVA in the latest infographic research report. If you are no longer interested in CEVA, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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