Bit of context first: I’m doing a write up on a short inv. idea on a silicon wafer manufacturer. My inv. thesis is that it has been spending WAY too much building up capacity (60% underutilised in rev. terms) which in my view is not likely to get filled anytime soon. The current valuation suggests that the market doesn’t believe this capacity it going to be utilised in the near term either …Here’s where it get’s slightly tricky though…
At face value, the 9x PE rating is based on an (I believe) an overinflated earnings figure guided by management. I believe the true PE is more like 17x. So on the basis of my PE estimate, would it be fair to say tha the market is
Not sure what the question is, but re: short ideas, remember the old adage, i.e. “markets can remain irrational longer than you can remain solvent”. Aside from pointing out that the valuation is overblown and making sure the idea is actually transactionable, I would suggest also looking for near-term (negative) share price triggers. Missed earnings or materialized significant risks are good candidates, as do missed debt payments, but there are many others.