Is it time to consider buying Power Integrations, Inc. (NASDAQ:POWI)?

Although Power Integrations, Inc. (NASDAQ:POWI) may not have the largest market capitalization in the market, its stock price has seen a decent growth of 17% on the NASDAQGS over the past few months. The recent rally in stock prices has pushed the company in the right direction, although it is still short of its annual high. 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, could the stock still be trading at a relatively cheap price? Today we will analyze the most recent data on Power Integrations’ outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for power integrations

What are electrical integrations worth?

Power integrations appear expensive according to our price multiple model, which compares the company’s price-to-earnings ratio to the industry average. 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 note that Power Integrations’ ratio of 79.29x is higher than its peer average of 29.42x, suggesting that the stock is trading at a premium to the Semiconductor sector. But is there another opportunity to buy cheap in the future? Since Power Integrations stock is quite volatile (meaning its price movements are magnified relative to the rest of the market), this could mean the price can fall, giving us another chance to ‘buy in the future. This is based on its high beta, which is a good indicator of stock price volatility.

What does the future of power integrations look like?

Investors looking for growth in their portfolio may want to consider a company’s prospects before buying its shares. Buying a great company with a solid outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. However, in the case of Power Integrations, a relatively lackluster earnings growth of 7.8% is expected, which does little to strengthen its investment thesis. Growth does not appear to be the primary reason for a decision to buy Power Integrations, at least in the short term.

What this means for you

Are you a shareholder? POWI’s future growth appears to have been priced into the current stock price, with shares trading above industry price multiples. However, this raises another question: is now the right time to sell? If you think POWI should trade below its current price, selling high and buying it back when its price drops toward the industry PE ratio can be profitable. But before making this decision, check if its fundamentals have changed.

Are you a potential investor? If you’ve been watching POWI for a while, now may not be the best time to get into the stock. The price has outperformed its industry peers, meaning there is likely no longer any upside to a mispricing. However, the positive growth outlook may imply that it is worth investigating other factors in order to take advantage of the next price drop.

If you want to learn more about Power Integrations as a company, it’s important to be aware of the risks it faces. You would be interested to know that we found 2 Warning Signs for Power Integrations and you will want to know them.

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

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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.

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