Let's talk about the popular Delta Electronics, Inc. (TPE:2308). The company's shares saw a decent share price growth in the teens level on the TSEC over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine Delta Electronics’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in Delta Electronics?
Delta Electronics 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 Delta Electronics’s ratio of 30.48x is above its peer average of 20.25x, which suggests the stock is trading at a higher price compared to the Electronic industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Delta Electronics’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Delta Electronics generate?
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. With profit expected to grow by 82% over the next couple of years, the future seems bright for Delta Electronics. 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 well and truly priced in 2308’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe 2308 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 2308 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 2308, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Diving deeper into the forecasts for Delta Electronics mentioned earlier will help you understand how analysts view the stock going forward. Luckily, you can check out what analysts are forecasting by clicking here.
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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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Delta Electronics, Inc., together with its subsidiaries, provides power and thermal management solutions in Mainland China, the United States, Taiwan, Thailand, and internationally.
Flawless balance sheet with reasonable growth potential.
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