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What Does Universal Display Corporation's (NASDAQ:OLED) Share Price Indicate?

Simply Wall St

Universal Display Corporation (NASDAQ:OLED), which is in the semiconductor business, and is based in United States, saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$218 and falling to the lows of US$173. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Universal Display's current trading price of US$180 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Universal Display’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Universal Display

Is Universal Display still cheap?

According to my relative valuation model, the stock is currently overvalued. 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 Universal Display’s ratio of 64.85x is above its peer average of 31x, which suggests the stock is overvalued compared to the Semiconductor industry. But, is there another opportunity to buy low in the future? Since Universal Display’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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.

Can we expect growth from Universal Display?

NasdaqGS:OLED Past and Future Earnings, February 5th 2020

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Universal Display’s 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 well and truly priced in OLED’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe OLED should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on OLED for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for OLED, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Universal Display. You can find everything you need to know about Universal Display in the latest infographic research report. If you are no longer interested in Universal Display, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.