Is There Now An Opportunity In Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC)?

Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$68.30 at one point, and dropping to the lows of US$50.49. 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 Kulicke and Soffa Industries' current trading price of US$50.49 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 Kulicke and Soffa Industries’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 Kulicke and Soffa Industries

Is Kulicke and Soffa Industries still cheap?

Great news for investors – Kulicke and Soffa Industries is still trading at a fairly cheap price 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 Kulicke and Soffa Industries’s ratio of 6.95x is below its peer average of 25.97x, which indicates the stock is trading at a lower price compared to the Semiconductor industry. What’s more interesting is that, Kulicke and Soffa Industries’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 Kulicke and Soffa Industries generate?

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. However, with a negative profit growth of -17% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Kulicke and Soffa Industries. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although KLIC is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to KLIC, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on KLIC for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, Kulicke and Soffa Industries has 4 warning signs (and 2 which shouldn't be ignored) we think you should know about.

If you are no longer interested in Kulicke and Soffa Industries, 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.