Is Now An Opportune Moment To Examine Coretronic Corporation (GTSM:5371)?

Coretronic Corporation (GTSM:5371), might not be a large cap stock, but it saw significant share price movement during recent months on the GTSM, rising to highs of NT$36.80 and falling to the lows of NT$33.05. 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 Coretronic's current trading price of NT$35.95 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 Coretronic’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 Coretronic

What's the opportunity in Coretronic?

Great news for investors – Coretronic is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio 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 Coretronic’s ratio of 10.19x is below its peer average of 17.05x, which indicates the stock is trading at a lower price compared to the Electronic industry. Another thing to keep in mind is that Coretronic’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

Can we expect growth from Coretronic?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Though in the case of Coretronic, it is expected to deliver a relatively unexciting top-line growth of 4.4% over the next year, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since 5371 is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on 5371 for a while, now might be the time to enter the stock. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 5371. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.

So while earnings quality is important, it's equally important to consider the risks facing Coretronic at this point in time. To that end, you should learn about the 2 warning signs we've spotted with Coretronic (including 1 which is potentially serious).

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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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