Stock Analysis

When Should You Buy Allegro MicroSystems, Inc. (NASDAQ:ALGM)?

NasdaqGS:ALGM
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Allegro MicroSystems, Inc. (NASDAQ:ALGM), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$52.72 at one point, and dropping to the lows of US$29.52. 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 Allegro MicroSystems' current trading price of US$29.52 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Allegro MicroSystems’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Allegro MicroSystems

Is Allegro MicroSystems Still Cheap?

According to my valuation model, Allegro MicroSystems seems to be fairly priced at around 16% below my intrinsic value, which means if you buy Allegro MicroSystems today, you’d be paying a fair price for it. And if you believe that the stock is really worth $35.18, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Allegro MicroSystems’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Allegro MicroSystems generate?

earnings-and-revenue-growth
NasdaqGS:ALGM Earnings and Revenue Growth October 16th 2023

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. 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. Allegro MicroSystems' earnings over the next few years are expected to increase by 38%, 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? ALGM’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on ALGM, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To that end, you should learn about the 2 warning signs we've spotted with Allegro MicroSystems (including 1 which is significant).

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

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

Find out whether Allegro MicroSystems 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.

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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.