Is It Time To Consider Buying STMicroelectronics N.V. (EPA:STMPA)?

Let's talk about the popular STMicroelectronics N.V. (EPA:STMPA). The company's shares received a lot of attention from a substantial price increase on the ENXTPA over the last few months. While good news for shareholders, the company has traded much higher in the past year. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at STMicroelectronics’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for STMicroelectronics

What's The Opportunity In STMicroelectronics?

Good news, investors! STMicroelectronics is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. 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 9.5x is currently well-below the industry average of 26.64x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, STMicroelectronics’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 does the future of STMicroelectronics look like?

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. However, with a negative profit growth of -3.0% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for STMicroelectronics. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although STMPA is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. We recommend you think about whether you want to increase your portfolio exposure to STMPA, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on STMPA for a while, but hesitant on making the leap, we recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of STMicroelectronics.

If you are no longer interested in STMicroelectronics, 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.