Should you be investigating Tower Semiconductor Corporation (NASDAQ:TSEM) at $45.82?

Tower Semiconductor Co., Ltd. (NASDAQ:TSEM) may not be a large-cap stock, but it has seen a significant 26% share price increase over the past two months on the NASDAQGS. The recent surge in stock price has the company trading near its 52-week high. It’s a mid-cap stock with high analyst coverage, so you can assume any recent changes to the company’s outlook have already been priced in. But could the stock still be trading at a relatively cheap price? Let’s take a closer look at Tower Semiconductor’s valuation and outlook to determine if there’s still a bargain opportunity.

Check out our latest analysis for Tower Semiconductor.

What are the opportunities for Tower Semiconductor?

Good news for investors – Tower Semiconductor is still trading at a fairly low price according to our price multiple model, which compares the company’s price-to-earnings ratio to the industry average. In this example, we used the price-to-earnings ratio (PE) given that there is not enough information to reliably predict a stock’s cash flows. Tower Semiconductor’s multiple of 10.32x is lower than its industry average of 28.07x, indicating that the stock is trading at a discount compared to the semiconductor industry. What’s even more interesting is that Tower Semiconductor’s stock price has been very stable. This could mean two things. First, it may take a while for the stock to approach its peers, and second, there may be fewer opportunities to buy low. When that value is reached, it becomes the future. This is because the stock price is less volatile than the overall market due to its low beta value.

What kind of growth will Tower Semiconductor generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a solid outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. But short-term growth is certainly not a factor in the buying decision, given the large double-digit negative change in earnings expected over the next few years. There appears to be a high degree of uncertainty ahead for Tower Semiconductor, at least in the near term.

what this means to you

Are you a shareholder? Although TSEM is currently trading below its industry P/E, the adverse outlook for negative growth poses some risk. We recommend considering whether increasing your portfolio’s exposure to TSEM or diversifying into another stock is a better choice for your overall risk and return.

Are you a potential investor? If you’ve been keeping an eye on TSEM for a while but are hesitant to take the leap, we recommend researching the stock further. Given the current prices, now is a great time to make a decision. However, be aware of the risks associated with future negative growth prospects.

So while earnings quality is important, it’s equally important to consider the risks facing Tower Semiconductor at the moment. For example, we’ve identified 2 warning signs for Tower Semiconductor (1 is important) you should know about.

If you are no longer interested in Tower Semiconductor, 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 using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.