While Silicon Motion Technology Corporation (NASDAQ:SIMO) might not have the largest market cap around , it saw a decent share price growth of 15% on the NASDAQGS 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. As a mid-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, what if the stock is still a bargain? Let's take a look at Silicon Motion Technology's outlook and value based on the most recent financial data to see if the opportunity still exists.

Is Silicon Motion Technology Still Cheap?

Silicon Motion Technology 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. 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 47.41x is currently well-above the industry average of 30.8x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, Silicon Motion Technology'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.

What does the future of Silicon Motion Technology look like?

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. In the upcoming year, Silicon Motion Technology's earnings are expected to increase by 87%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? SIMO's optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe SIMO 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 tabs on SIMO for some time, 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 positive outlook is encouraging for SIMO, which means it's worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Silicon Motion Technology as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Silicon Motion Technology has 2 warning signs and it would be unwise to ignore these.

If you are no longer interested in Silicon Motion Technology, 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