Stock Analysis

When Should You Buy Delta Electronics, Inc. (TPE:2308)?

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TWSE:2308
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Today we're going to take a look at the well-established Delta Electronics, Inc. (TPE:2308). The company's stock received a lot of attention from a substantial price increase 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. But what if there is still an opportunity to buy? Let’s take a look at Delta Electronics’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Delta Electronics

What is Delta Electronics worth?

Delta Electronics appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. 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 29.52x is currently well-above the industry average of 17.25x, meaning that it is trading at a more expensive price relative to its peers. In addition to this, it seems like Delta Electronics’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Delta Electronics generate?

earnings-and-revenue-growth
TSEC:2308 Earnings and Revenue Growth January 2nd 2021

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. Delta Electronics' earnings over the next few years are expected to increase by 40%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

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.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Delta Electronics, and understanding this should be part of your investment process.

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About TWSE:2308

Delta Electronics

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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