What Does Cirrus Logic, Inc.'s (NASDAQ:CRUS) Share Price Indicate?

Cirrus Logic, Inc. (NASDAQ:CRUS), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. While good news for shareholders, the company has traded much higher in the past year. 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? Today we will analyse the most recent data on Cirrus Logic’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Cirrus Logic

Is Cirrus Logic Still Cheap?

According to our valuation model, the stock is currently overvalued by about 25%, trading at US$92.56 compared to our intrinsic value of $73.80. This means that the opportunity to buy Cirrus Logic at a good price has disappeared! But, is there another opportunity to buy low in the future? Since Cirrus Logic’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 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. Cirrus Logic's earnings over the next few years are expected to increase by 57%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? CRUS’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe CRUS should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 tabs on CRUS for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for CRUS, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Cirrus Logic at this point in time. Every company has risks, and we've spotted 2 warning signs 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.