Cree, Inc. (CREE): Invest in This LED Stock for Long Term Gains

Osram, a German company, yesterday announced that it is launching a new LED light bulb that costs less than 10 euros ($13.10), directly in competition with Cree, Inc. (NASDAQ:CREE). The company has claimed the life of the bulb to be 15 years. The company is also building a new plant in China at a cost of over 100 million euros to boost its presence in the fast growing Asian market.

Conclusion

The company is trading at a trailing twelve months P/E multiple of more than 100 times. The P/S and price to cash flow ratios are also much higher than the industry average. It has been trading above its 100 DMA and 200 DMA since October 2012. These factors clearly indicate that the stock is overvalued right now.

But the company has zero financial leverage and high liquidity ratios. Both these factors ensure that the company is able to finance its working capital requirements, capital and R&D expenditures from its operating cash flows itself. It gives the company the flexibility to grow in the manner it desires. Combining this with the expected boom in the LED market in the next few years, the company is forecast to do very well during the phase. The possibility of any short term return is lower, but those investors who can be patient enough to hold on to the stock for some years could see considerable returns.

The article Invest in This LED Stock for Long Term Gains originally appeared on Fool.com.

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