Is There Now An Opportunity In Benchmark Electronics, Inc. (NYSE:BHE)?

Benchmark Electronics, Inc. (NYSE:BHE), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NYSE over the last few months. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today we will analyse the most recent data on Benchmark Electronics’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Benchmark Electronics

What's The Opportunity In Benchmark Electronics?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Benchmark Electronics’s ratio of 22.24x is trading slightly below its industry peers’ ratio of 22.38x, which means if you buy Benchmark Electronics today, you’d be paying a decent price for it. And if you believe that Benchmark Electronics should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers.

What kind of growth will Benchmark Electronics generate?

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. However, with a negative profit growth of -12% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Benchmark Electronics. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Currently, BHE appears to be trading around industry price multiples, 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 BHE, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on BHE for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This 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 crystallize your views on BHE should the price fluctuate below the industry PE ratio.

If you'd like to know more about Benchmark Electronics as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for Benchmark Electronics you should be aware of.

If you are no longer interested in Benchmark Electronics, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com