Rockchip Electronics Co., Ltd. (SHSE:603893), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the SHSE over the last few months, increasing to CN¥68.36 at one point, and dropping to the lows of CN¥52.83. 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 Rockchip Electronics' current trading price of CN¥51.73 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 Rockchip Electronics's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

What Is Rockchip Electronics Worth?

Rockchip Electronics is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. We've used the price-to-earnings ratio in this instance because there's not enough visibility to forecast its cash flows. The stock's ratio of 73.25x is currently well-above the industry average of 44.01x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, Rockchip Electronics'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 levels around its industry peers, 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.

Can we expect growth from Rockchip Electronics?

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 more than double over the next couple of years, the future seems bright for Rockchip Electronics. 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? It seems like the market has well and truly priced in 603893'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 603893 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.

Are you a potential investor? If you've been keeping an eye on 603893 for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for 603893, which means it's worth diving deeper into other factors in order to take advantage of the next price drop.

Since timing is quite important when it comes to individual stock picking, it's worth taking a look at what those latest analysts forecasts are. So feel free to check out our free graph representing analyst forecasts.

If you are no longer interested in Rockchip 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.