At NT$318, Is Delta Electronics, Inc. (TWSE:2308) Worth Looking At Closely?

Today we're going to take a look at the well-established Delta Electronics, Inc. (TWSE:2308). The company's stock saw a decent share price growth of 12% on the TWSE over the last few months. While good news for shareholders, the company has traded much higher in the past year. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Delta Electronics’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Delta Electronics

What's The Opportunity In Delta Electronics?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Delta Electronics’s ratio of 25.61x is trading slightly above its industry peers’ ratio of 23.54x, which means if you buy Delta Electronics today, you’d be paying a relatively sensible price for it. And if you believe Delta Electronics 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. Although, there may be an opportunity to buy in the future. This is because Delta Electronics’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 kind of growth will Delta Electronics generate?

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. With profit expected to grow by 62% 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? 2308’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 2308? 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 2308, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 2308, 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'd like to know more about Delta Electronics as a business, it's important to be aware of any risks it's facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Delta Electronics.

If you are no longer interested in Delta Electronics, 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.