Cirrus Logic, Inc. (NASDAQ:CRUS), might not be a large cap stock, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$146 and falling to the lows of US$113. 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 Cirrus Logic's current trading price of US$123 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 Cirrus Logic’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Cirrus Logic

What Is Cirrus Logic Worth?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Cirrus Logic’s ratio of 21.84x is trading slightly below its industry peers’ ratio of 26.47x, which means if you buy Cirrus Logic today, you’d be paying a decent price for it. And if you believe Cirrus Logic should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like Cirrus Logic’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Cirrus Logic look like?

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. Though in the case of Cirrus Logic, it is expected to deliver a negative earnings growth of -6.4%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? CRUS seems priced close to industry peers 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 beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on CRUS, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on CRUS for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This 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 gel your views on CRUS should the price fluctuate below the industry PE ratio.

If you'd like to know more about Cirrus Logic as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Cirrus Logic you should know about.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.