Power Integrations, Inc. (NASDAQ:POWI), might not be a large cap stock, but it saw a decent share price growth of 17% 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. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock's share price. However, what if the stock is still a bargain? Today we will analyse the most recent data on Power Integrations's outlook and valuation to see if the opportunity still exists.

What's The Opportunity In Power Integrations?

Power Integrations 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 79.02x is currently well-above the industry average of 30.2x, meaning that it is trading at a more expensive price relative to its peers. 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.

What kind of growth will Power Integrations 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. Though in the case of Power Integrations, it is expected to deliver a relatively unexciting earnings growth of 7.8%, which doesn't help build up its investment thesis. Growth doesn't appear to be a main reason for a buy decision for Power Integrations, at least in the near term.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in POWI's outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to 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.

Are you a potential investor? If you've been keeping tabs on POWI 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 growth outlook may mean 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 Power Integrations as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for Power Integrations you should be aware of.

If you are no longer interested in Power Integrations, 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