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When Should You Buy MaxLinear, Inc. (NASDAQ:MXL)?

Simply Wall St ·  {{timeTz}}

While MaxLinear, Inc. (NASDAQ:MXL) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the NASDAQGS over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company's outlook is already priced into the stock. However, what if the stock is still a bargain? Let's take a look at MaxLinear's outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for MaxLinear

Is MaxLinear Still Cheap?

MaxLinear is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison 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 MaxLinear's ratio of 27.36x is above its peer average of 16.08x, which suggests the stock is trading at a higher price compared to the Semiconductor industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since MaxLinear'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.

What does the future of MaxLinear look like?

earnings-and-revenue-growthNasdaqGS:MXL Earnings and Revenue Growth October 5th 2022

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. With profit expected to grow by 77% over the next couple of years, the future seems bright for MaxLinear. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? MXL's optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe MXL should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 MXL 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 positive outlook is encouraging for MXL, which means it's worth diving deeper into other factors in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 1 warning sign with MaxLinear, and understanding it should be part of your investment process.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.

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