Is it time to consider buying Universal Display Corporation (NASDAQ:OLED)?

Universal Display Corporation (NASDAQ:OLED), may not be a large-cap stock, but it has received a lot of attention due to a substantial price increase on the NASDAQGS over the past few months. The company is now trading at high annual levels following the recent rise in its stock price. Since many analysts cover mid-cap stocks, we can expect any price-sensitive announcements to have already been factored into the stock price. However, what if the stock is still a bargain? Let’s take a closer look at Universal Display’s valuation and outlook to determine if there’s still a bargain opportunity.

Check out our latest analysis for Universal Display

What is the opportunity for universal display?

Universal Display appears to be expensive according to our price multiple model, which compares the company’s price-to-earnings ratio to the industry average. We used the price-to-earnings ratio in this case because there is not enough visibility to forecast its cash flows. The stock’s ratio of 45.34x is currently well above the industry average of 30.2x, meaning it is trading at a higher price than its peers. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Universal Display’s 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 kind of growth will Universal Display generate?

Future outlook is an important aspect when considering buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a strong outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. Universal Display’s profits over the next few years are expected to increase by 34%, which suggests a very optimistic future. This should lead to more robust cash flows, translating into a higher stock market value.

What this means for you

Are you a shareholder? It appears the market has well and truly priced in OLED’s positive outlook, with shares trading above industry price multiples. However, this raises another question: is now the right time to sell? If you think OLED 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 keeping your eye on OLED for a while, now might 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 from mispricing. However, the optimistic outlook is encouraging for OLED, meaning it’s worth investigating other factors in order to take advantage of the next price drop.

So while earnings quality is important, it’s equally important to consider the risks universal OOH faces at this time. For example, we identified 2 warning signs for universal display (1 is significant) you should be familiar.

If you are no longer interested in Universal Display, you can use our free platform to consult our list of more than 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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