Is It Time To Consider Buying Jih Lin Technology Co., Ltd. (TPE:5285)?

Jih Lin Technology Co., Ltd. (TPE:5285), is not the largest company out there, but it received a lot of attention from a substantial price increase on the TSEC over the last few months. 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 Jih Lin Technology’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Jih Lin Technology

Is Jih Lin Technology still cheap?

Jih Lin Technology is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Jih Lin Technology’s ratio of 64.22x is above its peer average of 24.33x, which suggests the stock is trading at a higher price compared to the Semiconductor industry. But, is there another opportunity to buy low in the future? Since Jih Lin Technology’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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.

Can we expect growth from Jih Lin Technology?

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. Jih Lin Technology's revenue growth are expected to be in the teens in the upcoming year, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? 5285’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 5285 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 5285 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 optimistic prospect is encouraging for 5285, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Jih Lin Technology, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 4 warning signs for Jih Lin Technology (of which 1 is a bit unpleasant!) you should know about.

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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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