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Power Integrations, Inc. (NASDAQ:POWI), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$66.70 at one point, and dropping to the lows of US$44.90. 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 Power Integrations' current trading price of US$44.90 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Power Integrations’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What Is Power Integrations Worth?
Power Integrations appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 Power Integrations’s ratio of 79.3x is above its peer average of 22.39x, which suggests the stock is trading at a higher price compared to the Semiconductor industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Power Integrations’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.
Check out our latest analysis for Power Integrations
Can we expect growth from Power Integrations?
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. Power Integrations' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger 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 POWI’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe POWI should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.