Diodes IncDIOD74,68 $
Today we have a moderately speculative idea.: take shares in semiconductor company Diodes (NASDAQ: DRINK), because it is priced unfairly cheap.
Growth potential and validity: 16% behind 14 Months; 41,5% behind 3 of the year; 10% per annum during 15 years.
Why stocks can go up: because they cost three kopecks, despite the fact that the company's business is marginal and in a promising sector.
How do we act: we take shares now by 77,51 $.
When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.
And what is there with the author's forecasts
Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.
So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark. As with the investment idea in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.
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Investment editorial office
What the company makes money on
Diodes is engaged in the production of semiconductor products. Recently, a detailed review of it has already been published., so we will not repeat ourselves here..
Key moment: The main production facilities of the company are located in China, particularly in Shanghai, and the main sales of Diodes are in Asia.
Arguments in favor of the company
Fell down. The company's shares have fallen sharply in these six months.: since January they have dropped from 111 to 77,51 $. Think, this gives us the opportunity to pick them up in anticipation of a rebound.
perspective. The company's products are extremely in demand now - and I would not expect, that the demand for it will decrease in the near future, because society, and economies become increasingly dependent on high performance machines, components for which Diodes supplies.
Certainly, increase in the key rate FED and a slowdown in the global economy may somewhat slow down the company's victorious march, but I would not overestimate the role of the global economic environment in the case of semiconductor companies. Chips are needed in any climate and in any circumstances, it's no longer a luxury, but almost an analogue of oil.
Cheapness relative and absolute. The company has a fairly modest price.: P / E — 13,57 and P / S — 1,95. Its capitalization is 3.51 billion.
Acceptable bookkeeping. The company has 805.443 million dollars of debt, of which 463.493 million must be repaid during the year. There is enough money at the disposal of the company to close all urgent debts: there are 306 million on the account and 362.035 million debts of counterparties.
In general, the company's debt situation looks quite decent., which is a definite plus in the age of raising rates and rising prices for loans.
Can buy. Considering all of the above, the company may well be bought by some major semiconductor manufacturer.
What can get in the way
China, China… Any U.S. prohibition initiatives regarding the development of the semiconductor sector in China will hit Diodes hard, And it's a permanent threat.
As for current circumstances, then you should keep in mind, that China is now under severe quarantine, in particular in Shanghai, which is important for Diodes. So you should mentally prepare., that the consequences of this quarantine will be reflected in the company's reporting. However, it seems to me, these risks are already partly priced in Diodes shares.
What's the bottom line?
We take shares now by 77,51 $. And then the multiverse provides us with at least three ways:
- wait for growth to 90 $. This is a modest goal considering all the positive aspects of the company., so we can hope, that this scenario is implemented in the following 14 Months;
- hold stocks until they return to the level 110 $. Here it is better to focus on 3 years of waiting;
- hold shares 15 years in sorrow and joy.