Is It Too Late To Consider Buying Semtech Corporation (NASDAQ:SMTC)?

Semtech Corporation (NASDAQ:SMTC), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. The company is inching closer to its yearly highs following the recent share price climb. 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. But what if there is still an opportunity to buy? Let’s examine Semtech’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Semtech

Is Semtech Still Cheap?

The stock is currently trading at US$63.11 on the share market, which means it is overvalued by 30% compared to our intrinsic value of $48.37. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Since Semtech’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 does the future of Semtech look like?

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. In the upcoming year, Semtech's earnings are expected to increase by 98%, 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 well and truly priced in SMTC’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe SMTC should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on SMTC for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for SMTC, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Semtech, you'd also look into what risks it is currently facing. At Simply Wall St, we found 2 warning signs for Semtech and we think they deserve your attention.

If you are no longer interested in Semtech, 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.