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Applied Optoelectronics: Value Can Be Deceiving (NASDAQ:AAOI)
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Applied Optoelectronics, Inc. (NASDAQ:AAOI) [Trend Analysis] may appear to some to have a low PE multiple and appear to be trading at a very cheap price based on this to investors, however, looks can be deceiving if we look at AAOI from a growth perspective over a longer period.
Applied Optoelectronics, Inc. (NASDAQ:AAOI) last traded at $10.06 after moving down -1.57% for the trading day.
AAOI is trading with a trailing 12 month P/E multiple of 52.95 and an estimated forward P/E multiple of 8.50. The stock has an estimated 5 year annual growth of 17.48% and a PEG multiple of 3.03.
From a value investor perspective, as mentioned Applied Optoelectronics, Inc. trades on an estimated forward P/E multiple of 8.50. The current estimated forward P/E ratio for the market as a whole is approximately 19.82. Therefore, for value investors AAOI appears to be underpriced.
For growth investors, who are more interested in growth into the longer term for the stock, we look at the PEG multiple (P/E to growth) of Applied Optoelectronics, Inc. (NASDAQ:AAOI). This PEG multiple takes into account the expected long term growth in earnings of Applied Optoelectronics, Inc. rather than merely the growth for one full earnings period ahead.
As a rule of thumb, growth investors often believe a stock with a PEG of between 0 and 1 is considered to be underpriced, between 1 and 2 to be at fair value and over 2 to be overpriced. Based on the PEG ratio of AAOI being 3.03, we consider Applied Optoelectronics, Inc. to likely be overpriced.
The mean analyst 12 month target price for Applied Optoelectronics, Inc. (NASDAQ:AAOI) is currently $19.60 or 94.83% above the current price. Additionally, the stock has been as high as $28.01 and as low as $8.17 in the last 52 weeks. Analysts are estimating that AAOI will report earnings per share of $0.17 next quarter.
