Is it time to consider buying Goertek Inc. (SZSE:002241)?

Goertek Inc. (SZSE: 002241), may not be a large-cap stock, but it has seen a double-digit share price rise of over 10% over the past two months on the SZSE . While this is good news for shareholders, the company has been trading much higher over the past year. As a mid-cap stock with high analyst coverage, you can assume that any recent changes in the company’s outlook are already priced into the stock. However, what if the stock is still a bargain? Let’s take a closer look at Goertek’s valuation and outlook to determine if there’s still a bargain opportunity.

See our latest analysis for Goertek

What is Goertek worth?

According to our price multiple model, which compares the company’s price-to-earnings ratio and the industry average, the stock price appears justified. In this case, we used the price-to-earnings (PE) ratio because there is not enough information to reliably forecast the stock’s cash flows. We see that Goertek’s ratio of 40.25x is trading slightly below its industry peers’ ratio of 41.12x, meaning if you buy Goertek today, you’ll be paying a reasonable price. And if you think Goertek should trade in this range, then there isn’t much room for the stock price to rise beyond the levels of other industry peers over the long term. However, there could be a buying opportunity in the future. This is because Goertek’s beta (a measure of stock price volatility) is high, meaning that price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s stock will likely fall more than the rest of the market, providing a great buying opportunity.

What kind of growth will Goertek generate?

SZSE: 002241 Profit and revenue growth on May 11, 2024

Investors looking for growth in their portfolio may want to consider a company’s prospects before buying its shares. Although value investors argue that it’s the intrinsic value relative to the price that matters most, a more compelling investment thesis would be high growth potential at a cheap price. Goertek’s profits are expected to double over the next few years, which suggests a very optimistic future. This should lead to greater cash flow, which would translate into a higher stock value.

What this means for you

Are you a shareholder? It appears the market has already priced in 002241’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors that we haven’t considered today, such as the background of its management team. Have these factors changed since you last looked at 002241? Will you have enough confidence to invest in the company if the price falls below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on 002241, now may not be the most optimal time to buy, given that it’s trading around industry price multiples. However, the optimistic forecast is encouraging for 002241, meaning it is worth digging deeper into other factors such as its balance sheet strength, in order to take advantage of the next price drop.

Keep in mind that when it comes to analyzing a stock, it is worth noting the risks involved. For example, we discovered 1 warning sign which you should browse to get a better picture of Goertek.

If you are no longer interested in Goertek, you can use our free platform to view our list of over 50 other stocks with high growth potential.

The assessment is complex, but we help to simplify it.

Find out if Goertek is potentially overvalued or undervalued by checking out our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to constitute financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your objectives or your financial situation. Our goal is to provide you with targeted, long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.