Should You Investigate Alpha Networks Inc. (TPE:3380) At NT$37.05?

While Alpha Networks Inc. (TPE:3380) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the TSEC over the last few months. 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? Today I will analyse the most recent data on Alpha Networks’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Alpha Networks

What's the opportunity in Alpha Networks?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 35.92x is currently well-above the industry average of 24.06x, meaning that it is trading at a more expensive price relative to its peers. Another thing to keep in mind is that Alpha Networks’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 the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.

What does the future of Alpha Networks look like?

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. However, with a relatively muted revenue growth of 9.8% expected in the upcoming year, short term growth doesn’t seem like a key driver for a buy decision for Alpha Networks.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in 3380’s 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 3380 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 3380 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 positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Alpha Networks has 1 warning sign and it would be unwise to ignore this.

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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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