In This Article:
Let's talk about the popular Monolithic Power Systems, Inc. (NASDAQ:MPWR). The company's shares saw a decent share price growth in the teens level on the NASDAQGS over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Monolithic Power Systems’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for Monolithic Power Systems
What is Monolithic Power Systems worth?
The stock is currently trading at US$412 on the share market, which means it is overvalued by 25% compared to my intrinsic value of $329.53. This means that the opportunity to buy Monolithic Power Systems at a good price has disappeared! Furthermore, Monolithic Power Systems’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What kind of growth will Monolithic Power Systems generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 85% over the next couple of years, the future seems bright for Monolithic Power Systems. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? MPWR’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe MPWR 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 MPWR 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 positive outlook is encouraging for MPWR, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.