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What Is NeoPhotonics Corporation's (NYSE:NPTN) Share Price Doing?

NeoPhotonics Corporation (NYSE:NPTN), is not the largest company out there, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$9.95 and falling to the lows of US$5.89. 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 NeoPhotonics' current trading price of US$5.95 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at NeoPhotonics’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 NeoPhotonics

What is NeoPhotonics worth?

According to my valuation model, NeoPhotonics seems to be fairly priced at around 19.58% above my intrinsic value, which means if you buy NeoPhotonics today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth $4.98, then there isn’t really any room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because NeoPhotonics’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will NeoPhotonics generate?

earnings-and-revenue-growth
earnings-and-revenue-growth

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for NeoPhotonics, at least in the near future.

What this means for you:

Are you a shareholder? NPTN seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on NPTN for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on NPTN should the price fluctuate below its true value.

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. Case in point: We've spotted 3 warning signs for NeoPhotonics you should be mindful of and 1 of these is a bit unpleasant.

If you are no longer interested in NeoPhotonics, 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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