NEW YORK (TheStreet) -- It would be an understatement to say it is odd to see a semiconductor stock with less than a 65% long-term price-to-earnings-growth ratio at this point in the stock market. This is especially true given that the chip stocks have been one of the leading sectors in this year's rally.
Diodes (DIOD) is still priced around $30, even though earnings are projected to jump from $1.05 last year to $1.51 this year and then $1.96 in 2015. (Wednesday, the shares closed at $29.48, up 0.8% for the day.) Even at a discounted earnings per share rate of 26.5 times this year's number, that would yield a price of $40, not the sub-$30 level where it has recently been.
You might not find the following piece under the company's symbol, but Nomura Securities analyst Rojit Shaw recently told Barron's that Diodes is one of only three takeover candidates he considers fundamentally undervalued. He might even get around to formally following the stock before it spikes much higher.
Why he apparently hasn't yet done so is a bit of a mystery. Still, ours is not to wonder why, but rather to ascertain whether and when to sell and buy. For Diodes, the time to buy is well nigh.
Technically speaking, the stock's chart pattern also looks superior. Diodes moved up to modest new highs a few weeks ago, then retreated from north of $30 and spent its time constructing the first 75% of an increasingly symmetrical V-shaped base. It has also formed a nearly perfect uptrend channel over the past seven months, as TheStreet's Jonas Elmerraji noted in 5 Tech Stocks to Trade for Gains This Week, yet is up less than 10% from where it traded one year ago.