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Is ChipMOS TECHNOLOGIES A Great Stock For Value Investors?

By Zacks Investment ResearchStock MarketsApr 10, 2017 09:35PM ET
www.investing.com/analysis/is-chipmos-technologies-a-great-stock-for-value-investors-200182249
Is ChipMOS TECHNOLOGIES A Great Stock For Value Investors?
By Zacks Investment Research   |  Apr 10, 2017 09:35PM ET
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?

One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put ChipMOS TECHNOLOGIES INC. (NASDAQ:IMOS) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:

PE Ratio

A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.

On this front, ChipMOS TECHNOLOGIES has a trailing twelve months PE ratio of 20.60, as you can see in the chart below:



This level however compares slightly unfavorably with the market at large, as the PE for the S&P 500 stands at about 20.28, as you can see in the chart below:



If we focus on ChipMOS TECHNOLOGIES’ PE trend, we can see that the company’s PE multiple has risen rapidly from the latter half of 2015 till almost the end of 2016. This increase was driven by a significant fall in earnings per share during that period, without a corresponding change in price. However, since the end of 2016, the PE multiple has been falling with the number remaining more or less stable over the past few months. This indicates an improving earnings scenario gradually getting channelized to a favorable PE.



Looking further, we can see that the stock’s PE compares favorably with the Zacks classified Computer & Technology sector’s trailing twelve months PE ratio, which stands at 21.90. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.



We should also point out that ChipMOS TECHNOLOGIES has a forward PE ratio (price relative to this year’s earnings) of just 14.21, so it is fair to say that a slightly more value-oriented path may be ahead for ChipMOS TECHNOLOGIES stock in the near term too.

P/S Ratio

Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.

Right now, ChipMOS TECHNOLOGIES has a P/S ratio of about 1.26. This is significantly lower than the S&P 500 average, which comes in at 3.08 right now. Also, as we can see in the chart below, this is significantly below the highs for this stock in particular over the past few years.



As we can see, the stock is trading somewhere around its median value for the time period from a P/S metric. This does not provide us with a conclusive direction as to the relative valuation of the stock in comparison to its historical trend.

Broad Value Outlook

In aggregate, ChipMOS TECHNOLOGIES currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes ChipMOS TECHNOLOGIES a solid choice for value investors.

What About the Stock Overall?

Though ChipMOS TECHNOLOGIES might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘A’ and a Momentum score of ‘F’. This gives IMOS a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen no estimate revisions in the past sixty days, while the full year estimate has seen zero upward and one downward revision in the same time period.

Consequently, the current quarter consensus estimate has increased by 31.6% in the past two months, while the full year estimate has fallen by 6.8%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.

Bottom Line

ChipMOS TECHNOLOGIES is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 46% out of more than 250 industries) further supports the growth potential of the stock.

However, with a Zacks Rank #3, it is hard to get too excited about this company overall. So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.

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Chipmos Technologies Ltd. (IMOS): Free Stock Analysis Report

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Is ChipMOS TECHNOLOGIES A Great Stock For Value Investors?
 

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Is ChipMOS TECHNOLOGIES A Great Stock For Value Investors?

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