While Amlogic (Shanghai) Co.,Ltd. (SHSE:688099) might not have the largest market cap around , it saw a significant share price rise of 50% in the past couple of months on the SHSE. While good news for shareholders, the company has traded much higher in the past year. 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, could the stock still be trading at a relatively cheap price? Let's examine Amlogic (Shanghai)Ltd's valuation and outlook in more detail to determine if there's still a bargain opportunity.

What's The Opportunity In Amlogic (Shanghai)Ltd?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio 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 46.93x is currently trading slightly below its industry peers' ratio of 49.33x, which means if you buy Amlogic (Shanghai)Ltd today, you'd be paying a reasonable price for it. And if you believe that Amlogic (Shanghai)Ltd should be trading at this level in the long run, then there's not much of an upside to gain over and above other industry peers. Furthermore, it seems like Amlogic (Shanghai)Ltd's share price is quite stable, which means there may be less chances to buy low in the future now that it's priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Amlogic (Shanghai)Ltd?

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. With profit expected to more than double over the next couple of years, the future seems bright for Amlogic (Shanghai)Ltd. 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 already priced in 688099's positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven't considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at 688099? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you've been keeping an eye on 688099, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 688099, which means it's worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Amlogic (Shanghai)Ltd as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Amlogic (Shanghai)Ltd has 1 warning sign and it would be unwise to ignore this.

If you are no longer interested in Amlogic (Shanghai)Ltd, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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