At €4.88, Is It Time To Put X-FAB Silicon Foundries SE (EPA:XFAB) On Your Watch List?

While X-FAB Silicon Foundries SE (EPA:XFAB) might not have the largest market cap around , it saw a decent share price growth of 17% on the ENXTPA over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. With many analysts covering the 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? Let’s examine X-FAB Silicon Foundries’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for X-FAB Silicon Foundries

What Is X-FAB Silicon Foundries Worth?

Good news, investors! X-FAB Silicon Foundries 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 6.25x is currently well-below the industry average of 11.73x, meaning that it is trading at a cheaper price relative to its peers. However, given that X-FAB Silicon Foundries’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.

What does the future of X-FAB Silicon Foundries look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 a double-digit 11% over the next couple of years, the outlook is positive for X-FAB Silicon Foundries. 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 XFAB is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic profit 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 financial health to consider, which could explain the current price multiple.

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

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Be aware that X-FAB Silicon Foundries is showing 3 warning signs in our investment analysis and 1 of those is significant...

If you are no longer interested in X-FAB Silicon Foundries, 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.