Is Orange Electronic Co., Ltd. (GTSM:4554) Potentially Undervalued?

Orange Electronic Co., Ltd. (GTSM:4554), which is in the auto components business, and is based in Taiwan, received a lot of attention from a substantial price movement on the GTSM over the last few months, increasing to NT$24.85 at one point, and dropping to the lows of NT$12.00. 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 Orange Electronic’s current trading price of NT$12.85 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Orange Electronic’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Orange Electronic

What is Orange Electronic worth?

Orange Electronic appears to be expensive according to my price multiple model, which makes a comparison between the company’s price-to-earnings ratio and 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 51.4x is currently well-above the industry average of 12.81x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Given that Orange Electronic’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.

Can we expect growth from Orange Electronic?

GTSM:4554 Past and Future Earnings April 7th 2020
GTSM:4554 Past and Future Earnings April 7th 2020

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 relatively muted revenue growth of 3.8% expected in the upcoming year, short term growth doesn’t seem like a key driver for a buy decision for Orange Electronic.

What this means for you:

Are you a shareholder? 4554’s future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe 4554 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on 4554 for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Orange Electronic. You can find everything you need to know about Orange Electronic in the latest infographic research report. If you are no longer interested in Orange Electronic, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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