InterDigital, Inc. (NASDAQ:IDCC), 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$98.39 and falling to the lows of US$79.57. 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 InterDigital's current trading price of US$81.80 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 InterDigital'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 InterDigital
What Is InterDigital Worth?
Good news, investors! InterDigital is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio 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 InterDigital's ratio of 11.89x is below its peer average of 45.34x, which indicates the stock is trading at a lower price compared to the Software industry. However, given that InterDigital's share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will InterDigital generate?
NasdaqGS:IDCC Earnings and Revenue Growth October 12th 2023
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. Though in the case of InterDigital, it is expected to deliver a highly negative earnings growth in the upcoming, 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? Although IDCC is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to IDCC, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you've been keeping an eye on IDCC for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
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. Every company has risks, and we've spotted 1 warning sign for InterDigital you should know about.
If you are no longer interested in InterDigital, 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.
