What Does X-FAB Silicon Foundries SE's (EPA:XFAB) Share Price Indicate?

X-FAB Silicon Foundries SE (EPA:XFAB), is not the largest company out there, but it received a lot of attention from a substantial price increase on the ENXTPA over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. As a 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 take a look at X-FAB Silicon Foundries’s outlook and value based on the most recent financial data to see if the opportunity still exists.

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What's The Opportunity In X-FAB Silicon Foundries?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that X-FAB Silicon Foundries’s ratio of 11.57x is trading slightly below its industry peers’ ratio of 13.23x, which means if you buy X-FAB Silicon Foundries today, you’d be paying a reasonable price for it. And if you believe that X-FAB Silicon Foundries 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. Although, there may be an opportunity to buy in the future. This is because X-FAB Silicon Foundries’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

See our latest analysis for X-FAB Silicon Foundries

What Kind Of Returns Can We Expect From X-FAB Silicon Foundries In The Future?

What kind of returns can we expect from X-FAB Silicon Foundries in the future? It’s one thing to get a stock at a low price, but the quality of the company is even more important, as its stock may be cheap or expensive for a reason. A way to assess stock quality is by looking how much it returns to you as the investor compared to how much you’re invested. X-FAB Silicon Foundries is expected to return 7.5% of your investment in the next couple of years if you buy the stock today. This is a pretty average return, which doesn’t significantly add much to the case for owning the stock.

What This Means For You

Are you a shareholder? XFAB’s positive future returns appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of the company’s management team. Has anything significant changed since the last time you examined XFAB? And will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on XFAB for a while, tentative on committing to the stock, we suggest you dig deeper into the stock. Should the stock become an attractive buy again, you will be more informed to make a decision on XFAB. Keep in mind the low future return, and whether the opportunity cost of investing in XFAB versus another stock is worth it.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. While conducting our analysis, we found that X-FAB Silicon Foundries has 2 warning signs and it would be unwise to ignore these.

If you are no longer interested in X-FAB Silicon Foundries, 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.