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Monolithic Power Systems, Inc. (NASDAQ:MPWR) received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. With many analysts covering the large-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 Monolithic Power Systems’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
View our latest analysis for Monolithic Power Systems
What Is Monolithic Power Systems Worth?
Great news for investors – Monolithic Power Systems is still trading at a fairly cheap price 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 Monolithic Power Systems’s ratio of 18.54x is below its peer average of 32x, which indicates the stock is trading at a lower price compared to the Semiconductor industry. What’s more interesting is that, Monolithic Power Systems’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 Monolithic Power Systems 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. 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. Though in the case of Monolithic Power Systems, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? Although MPWR is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. We recommend you think about whether you want to increase your portfolio exposure to MPWR, or whether diversifying into another stock may be a better move for your total risk and return.