Data I/O Corporation (NASDAQ:DAIO), which is in the electronic business, and is based in United States, saw significant share price movement during recent months on the NASDAQCM, rising to highs of $4.85 and falling to the lows of $3.61. 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 Data I/O's current trading price of $3.71 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 Data I/O’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Data I/O still cheap?
Data I/O is currently overpriced based on my relative valuation model. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Data I/O’s ratio of 27.13x is above its peer average of 17.76x, which suggests the stock is overvalued compared to the Electronic industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Data I/O’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.
Can we expect growth from Data I/O?
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. Though in the case of Data I/O, it is expected to deliver a highly negative earnings growth in the upcoming, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? If you believe DAIO is currently trading above its peers, 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 de-risk your portfolio. 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 DAIO for some time, now may not be the best time to enter into the stock. Price climbed passed its industry peers, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. 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 Data I/O. You can find everything you need to know about Data I/O in the latest infographic research report. If you are no longer interested in Data I/O, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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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. Thank you for reading.