Should You Think About Buying Genius Electronic Optical Co., Ltd. (TPE:3406) Now?

Genius Electronic Optical Co., Ltd. (TPE:3406), is not the largest company out there, but it saw significant share price movement during recent months on the TSEC, rising to highs of NT$663 and falling to the lows of NT$452. 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 Genius Electronic Optical's current trading price of NT$491 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 Genius Electronic Optical’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Genius Electronic Optical

What's the opportunity in Genius Electronic Optical?

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 Genius Electronic Optical’s ratio of 17.64x is trading slightly above its industry peers’ ratio of 17.62x, which means if you buy Genius Electronic Optical today, you’d be paying a relatively reasonable price for it. And if you believe that Genius Electronic Optical should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Although, there may be an opportunity to buy in the future. This is because Genius Electronic Optical’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Genius Electronic Optical look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 37% over the next couple of years, the future seems bright for Genius Electronic Optical. 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? 3406’s optimistic future growth appears to have been factored into the current share price, 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 3406? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on 3406, 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 3406, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Genius Electronic Optical, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 2 warning signs for Genius Electronic Optical you should know about.

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

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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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