Is It Too Late To Consider Buying Diodes Incorporated (NASDAQ:DIOD)?

While Diodes Incorporated (NASDAQ:DIOD) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. With many analysts covering the mid-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 Diodes’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Diodes

Is Diodes Still Cheap?

According to my valuation model, Diodes seems to be fairly priced at around 4.42% above my intrinsic value, which means if you buy Diodes today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth $87.16, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Diodes’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 Diodes 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. However, with a negative profit growth of -4.8% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Diodes. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? DIOD seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on DIOD for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on DIOD should the price fluctuate below its true value.

If you want to dive deeper into Diodes, you'd also look into what risks it is currently facing. For example, Diodes has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

If you are no longer interested in Diodes, 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.