Is It Too Late To Consider Buying SDI Corporation (TPE:2351)?

SDI Corporation (TPE:2351), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the TSEC. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine SDI’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for SDI

Is SDI still cheap?

According to my valuation model, SDI seems to be fairly priced at around 8.5% below my intrinsic value, which means if you buy SDI today, you’d be paying a fair price for it. And if you believe that the stock is really worth NT$101.55, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since SDI’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 SDI 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 SDI. 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 2351’s positive outlook, with shares trading around its fair value. 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 the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on 2351, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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 want to dive deeper into SDI, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for SDI and we think they deserve your attention.

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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. 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.
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