At US$57.84, Is Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) Worth Looking At Closely?

While Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. 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. But what if there is still an opportunity to buy? Let’s examine Kulicke and Soffa Industries’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Kulicke and Soffa Industries

What's the opportunity in Kulicke and Soffa Industries?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Kulicke and Soffa Industries’s ratio of 41.42x is trading slightly above its industry peers’ ratio of 41.35x, which means if you buy Kulicke and Soffa Industries today, you’d be paying a relatively sensible price for it. And if you believe Kulicke and Soffa Industries should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Kulicke and Soffa Industries’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 Kulicke and Soffa Industries 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. Kulicke and Soffa Industries' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in KLIC’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at KLIC? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on KLIC, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for KLIC, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Every company has risks, and we've spotted 2 warning signs for Kulicke and Soffa Industries you should know about.

If you are no longer interested in Kulicke and Soffa Industries, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

This article by Simply Wall St is general in nature. 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.

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