Is Now An Opportune Moment To Examine X-FAB Silicon Foundries SE (EPA:XFAB)?

While X-FAB Silicon Foundries SE (EPA:XFAB) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the ENXTPA. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. 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.

See our latest analysis for X-FAB Silicon Foundries

What Is X-FAB Silicon Foundries Worth?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’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 26.97x is currently trading slightly above its industry peers’ ratio of 25.74x, which means if you buy X-FAB Silicon Foundries today, you’d be paying a relatively sensible price for it. And if you believe X-FAB Silicon Foundries 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. So, is there another chance to buy low in the future? 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 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 X-FAB Silicon Foundries generate?

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 more than double over the next couple of years, the future seems bright 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? It seems like the market has already priced in XFAB’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 XFAB? 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 an eye on XFAB, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for XFAB, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about X-FAB Silicon Foundries as a business, it's important to be aware of any risks it's facing. Our analysis shows 2 warning signs for X-FAB Silicon Foundries (1 shouldn't be ignored!) and we strongly recommend you look at them before investing.

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.

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

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.