Over the past six months, Universal Display’s stock price fell to $87.50. Shareholders have lost 19.5% of their capital, which is disappointing considering the S&P 500 has climbed by 13.2%. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Is now the time to buy Universal Display, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Universal Display Not Exciting?
Even though the stock has become cheaper, we're cautious about Universal Display. Here are two reasons there are better opportunities than OLED and a stock we'd rather own.
1. Lackluster Revenue Growth
Long-term growth is the most important, but short-term results matter for semiconductors because the rapid pace of technological innovation (Moore's Law) could make yesterday's hit product obsolete today. Universal Display’s recent performance shows its demand has slowed as its annualized revenue growth of 1.2% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. 
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Universal Display’s revenue to rise by 6.2%. While this projection suggests its newer products and services will catalyze better top-line performance, it is still below the sector average.
Final Judgment
Universal Display’s business quality ultimately falls short of our standards. After the recent drawdown, the stock trades at 19.3× forward P/E (or $87.50 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at the most entrenched endpoint security platform on the market.
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