Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC), which is in the semiconductor business, and is based in Singapore, saw significant share price volatility over the past couple of months on the NasdaqGS, rising to the highs of $26.23 and falling to the lows of $19.14. 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 Kulicke and Soffa Industries’s current trading price of $19.14 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 Kulicke and Soffa Industries’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 Kulicke and Soffa Industries?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 23.43x is currently trading slightly above its industry peers’ ratio of 18.48x, which means if you buy Kulicke and Soffa Industries today, you’d be paying a relatively reasonable price for it. And if you believe Kulicke and Soffa Industries should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Kulicke and Soffa Industries’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Kulicke and Soffa Industries 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. With profit expected to more than double over the next couple of years, the future seems bright for Kulicke and Soffa Industries. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? KLIC’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 track record of its management team. Have these factors changed since the last time you looked at KLIC? 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 an eye on KLIC, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for KLIC, 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 Kulicke and Soffa Industries. You can find everything you need to know about Kulicke and Soffa Industries in the latest infographic research report. If you are no longer interested in Kulicke and Soffa Industries, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past 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. For errors that warrant correction please contact the editor at email@example.com.