AAOI Stock: Have Investors Already Priced In Applied Optoelectronics Inc Growth?


), a communications company based in United States, saw significant share price volatility over the past couple of months on the NasdaqGM, rising to the highs of $45.4 and falling to the lows of $32.79. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Applied Optoelectronics’s current trading price of $32.79 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Applied Optoelectronics’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

What is Applied Optoelectronics worth?

Great news for investors – Applied Optoelectronics is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is $43.08, but it is currently trading at $32.79 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because Applied Optoelectronics’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Applied Optoelectronics generate?

NasdaqGM:AAOI Future Profit Jan 19th 18
NasdaqGM:AAOI Future Profit Jan 19th 18

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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Applied Optoelectronics, at least in the near future.

What this means for you:

Are you a shareholder? Although Applied Optoelectronics is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to Applied Optoelectronics, 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 Applied Optoelectronics for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Applied Optoelectronics. You can find everything you need to know about Applied Optoelectronics in the latest infographic research report. If you are no longer interested in Applied Optoelectronics, you can use our free platform to see my list of over 50 other stocks with a high growth potential.


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