What Does MKS Instruments, Inc.'s (NASDAQ:MKSI) Share Price Indicate?

MKS Instruments, Inc. (NASDAQ:MKSI), is not the largest company out there, but it received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine MKS Instruments’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for MKS Instruments

What's The Opportunity In MKS Instruments?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 17% below my intrinsic value, which means if you buy MKS Instruments today, you’d be paying a fair price for it. And if you believe the company’s true value is $131.39, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that MKS Instruments’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from MKS Instruments?

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 -20% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for MKS Instruments. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Currently, MKSI appears to be trading around its fair value, 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 beneficial 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 MKSI for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears 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 MKSI should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing MKS Instruments at this point in time. Be aware that MKS Instruments is showing 3 warning signs in our investment analysis and 2 of those shouldn't be ignored...

If you are no longer interested in MKS Instruments, 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.