When Should You Buy Formosa Sumco Technology Corporation (TPE:3532)?

Formosa Sumco Technology Corporation (TPE:3532), might not be a large cap stock, but it saw a decent share price growth in the teens level on the TSEC over the last few months. Less-covered, small caps sees 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 take a look at Formosa Sumco Technology’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Formosa Sumco Technology

What is Formosa Sumco Technology worth?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 43x is currently well-above the industry average of 28.47x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, Formosa Sumco Technology’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What does the future of Formosa Sumco Technology 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 more than double over the next couple of years, the future seems bright for Formosa Sumco Technology. 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? 3532’s optimistic 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 3532 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 an eye on 3532 for a while, 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 optimistic prospect is encouraging for 3532, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. In terms of investment risks, we've identified 1 warning sign with Formosa Sumco Technology, and understanding this should be part of your investment process.

If you are no longer interested in Formosa Sumco Technology, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

If you’re looking to trade Formosa Sumco Technology, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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