What Is Cirrus Logic, Inc.'s (NASDAQ:CRUS) Share Price Doing?

While Cirrus Logic, Inc. (NASDAQ:CRUS) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$85.04 at one point, and dropping to the lows of US$70.42. 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 Cirrus Logic's current trading price of US$72.56 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 Cirrus Logic’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Cirrus Logic

What Is Cirrus Logic Worth?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 Cirrus Logic’s ratio of 26.01x is trading in-line with its industry peers’ ratio, which means if you buy Cirrus Logic today, you’d be paying a relatively sensible price for it. Furthermore, Cirrus Logic’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.

What kind of growth will Cirrus Logic generate?

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. Cirrus Logic's earnings over the next few years are expected to increase by 57%, 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? It seems like the market has already priced in CRUS’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 CRUS? 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 CRUS, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for CRUS, 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 while earnings quality is important, it's equally important to consider the risks facing Cirrus Logic at this point in time. You'd be interested to know, that we found 2 warning signs for Cirrus Logic and you'll want to know about them.

If you are no longer interested in Cirrus Logic, 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.