Stock Analysis

Is Now An Opportune Moment To Examine Thinking Electronic Industrial Co., Ltd. (TPE:2428)?

TWSE:2428
Source: Shutterstock

Thinking Electronic Industrial Co., Ltd. (TPE:2428), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the TSEC. 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 take a look at Thinking Electronic Industrial’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Thinking Electronic Industrial

What's the opportunity in Thinking Electronic Industrial?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Thinking Electronic Industrial’s ratio of 19.66x is trading slightly above its industry peers’ ratio of 19x, which means if you buy Thinking Electronic Industrial today, you’d be paying a relatively reasonable price for it. And if you believe Thinking Electronic Industrial should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Furthermore, Thinking Electronic Industrial’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

Can we expect growth from Thinking Electronic Industrial?

earnings-and-revenue-growth
TSEC:2428 Earnings and Revenue Growth March 22nd 2021

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. Thinking Electronic Industrial's earnings growth are expected to be in the teens in the upcoming year, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in 2428’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at 2428? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on 2428, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 2428, 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. While conducting our analysis, we found that Thinking Electronic Industrial has 1 warning sign and it would be unwise to ignore this.

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

If you’re looking to trade Thinking Electronic Industrial, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted


Valuation is complex, but we're helping make it simple.

Find out whether Thinking Electronic Industrial is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020


Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.