When Should You Buy Novatek Microelectronics Corp. (TWSE:3034)?

Novatek Microelectronics Corp. (TWSE:3034), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the TWSE over the last few months, increasing to NT$533 at one point, and dropping to the lows of NT$478. 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 Novatek Microelectronics' current trading price of NT$506 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Novatek Microelectronics’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Novatek Microelectronics

Is Novatek Microelectronics Still Cheap?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 18% below our intrinsic value, which means if you buy Novatek Microelectronics today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth NT$616.57, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Novatek Microelectronics’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 does the future of Novatek Microelectronics 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 grow by a double-digit 10% over the next couple of years, the outlook is positive for Novatek Microelectronics. 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? 3034’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on 3034, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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.

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. At Simply Wall St, we found 1 warning sign for Novatek Microelectronics and we think they deserve your attention.

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

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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.