While Sensata Technologies Holding plc (NYSE:ST) might not have the largest market cap around , it saw a decent share price growth of 14% on the NYSE over the last few months. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine Sensata Technologies Holding’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's The Opportunity In Sensata Technologies Holding?
The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Sensata Technologies Holding’s ratio of 23.42x is trading slightly above its industry peers’ ratio of 21.52x, which means if you buy Sensata Technologies Holding today, you’d be paying a relatively reasonable price for it. And if you believe Sensata Technologies Holding should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that Sensata Technologies Holding’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Check out our latest analysis for Sensata Technologies Holding
What kind of growth will Sensata Technologies Holding generate?
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. With profit expected to more than double over the next couple of years, the future seems bright for Sensata Technologies Holding. 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? It seems like the market has already priced in ST’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at ST? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on ST, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for ST, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, Sensata Technologies Holding has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.
If you are no longer interested in Sensata Technologies Holding, 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.