Aehr Test Systems (NASDAQ:AEHR), a semiconductors and semiconductor equipment company based in United States, saw a double-digit share price rise of over 10% in the past couple of months on the NasdaqCM. Less covered, small-stocks like AEHR 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 AEHR still be trading at a low price relative to its actual value? Today I will analyse the most recent data on AEHR’s outlook and valuation to see if the opportunity still exists. View our latest analysis for Aehr Test Systems
Is AEHR still cheap?
According to my relative valuation model, AEHR seems to be currently fairly priced. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 4x is currently trading slightly below its industry peers’ ratio of 5.4x, which means if you buy AEHR today, you’d be paying a relatively fair price for it. And if you believe AEHR should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since AEHR’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much AEHR moves relative to the rest of the market.
What does the future of AEHR look like?
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. With profit expected to grow by 85.88% over the next year, the near-term future seems bright for AEHR. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in AEHR’s positive outlook, 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 AEHR? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on AEHR, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for AEHR, which means it’s worth further examining 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 Aehr Test Systems. You can find everything you need to know about AEHR in the latest infographic research report. If you are no longer interested in Aehr Test Systems, 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.