Maxim Integrated Products, Inc. (NASDAQ:MXIM) saw significant share price movement during recent months on the NASDAQGS, rising to highs of $60.55 and falling to the lows of $51.95. 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 Maxim Integrated Products’s current trading price of $53.66 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Maxim Integrated Products’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
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What’s the opportunity in Maxim Integrated Products?
The stock seems fairly valued at the moment according to my relative valuation model. 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 Maxim Integrated Products’s ratio of 22.7x is trading slightly above its industry peers’ ratio of 20.1x, which means if you buy Maxim Integrated Products today, you’d be paying a relatively reasonable price for it. And if you believe that Maxim Integrated Products should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that Maxim Integrated Products’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 Maxim Integrated Products?
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. Maxim Integrated Products’s earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? MXIM’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 track record of its management team. Have these factors changed since the last time you looked at MXIM? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on MXIM, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for MXIM, 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Maxim Integrated Products. You can find everything you need to know about Maxim Integrated Products in the latest infographic research report. If you are no longer interested in Maxim Integrated Products, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.