Is There Now An Opportunity In Shenzhen Techwinsemi Technology Co., Ltd. (SZSE:001309)?

Shenzhen Techwinsemi Technology Co., Ltd. (SZSE:001309), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the SZSE. While good news for shareholders, the company has traded much higher in the past year. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today we will analyse the most recent data on Shenzhen Techwinsemi Technology’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Shenzhen Techwinsemi Technology

What Is Shenzhen Techwinsemi Technology Worth?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. We’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 50.83x is currently trading slightly above its industry peers’ ratio of 47.62x, which means if you buy Shenzhen Techwinsemi Technology today, you’d be paying a relatively reasonable price for it. And if you believe Shenzhen Techwinsemi Technology should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Shenzhen Techwinsemi Technology’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 the stock moves relative to the rest of the market.

What kind of growth will Shenzhen Techwinsemi Technology 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. Shenzhen Techwinsemi Technology's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger 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 001309’s positive outlook, with shares trading around industry price multiples. 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 001309? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on 001309, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 001309, 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 Shenzhen Techwinsemi Technology, you'd also look into what risks it is currently facing. For example - Shenzhen Techwinsemi Technology has 2 warning signs we think you should be aware of.

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

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com