Should You Think About Buying Melexis NV (EBR:MELE) Now?

By
Simply Wall St
Published
November 18, 2021
ENXTBR:MELE
Source: Shutterstock

Melexis NV (EBR:MELE), might not be a large cap stock, but it led the ENXTBR gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Melexis’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Melexis

What's the opportunity in Melexis?

Good news, investors! Melexis is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. 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 Melexis’s ratio of 36.15x is below its peer average of 47.8x, which indicates the stock is trading at a lower price compared to the Semiconductor industry. Although, there may be another chance to buy again in the future. This is because Melexis’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.

Can we expect growth from Melexis?

earnings-and-revenue-growth
ENXTBR:MELE Earnings and Revenue Growth November 19th 2021

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. With profit expected to grow by 53% over the next couple of years, the future seems bright for Melexis. 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? Since MELE is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on MELE for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy MELE. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 1 warning sign for Melexis and you'll want to know about it.

If you are no longer interested in Melexis, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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