Stock Analysis

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

ENXTBR:MELE
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Melexis NV (EBR:MELE), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the ENXTBR over the last few months, increasing to €109 at one point, and dropping to the lows of €78.20. 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 Melexis' current trading price of €78.45 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Melexis’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Melexis

What is Melexis worth?

According to my valuation model, Melexis seems to be fairly priced at around 13% below my intrinsic value, which means if you buy Melexis today, you’d be paying a reasonable price for it. And if you believe the company’s true value is €89.80, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Melexis’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Melexis generate?

earnings-and-revenue-growth
ENXTBR:MELE Earnings and Revenue Growth March 2nd 2022

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. 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. Melexis' earnings over the next few years are expected to increase by 39%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in MELE’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 the stock? 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 MELE, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Melexis, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 2 warning signs for Melexis and you'll want to know about them.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Melexis is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.