Today we’re going to take a look at the well-established Dr Pepper Snapple Group Inc (NYSE:DPS). The company’s stock led the NYSE gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Dr Pepper Snapple Group’s outlook and valuation to see if the opportunity still exists. Check out our latest analysis for Dr Pepper Snapple Group
What’s the opportunity in Dr Pepper Snapple Group?
Dr Pepper Snapple Group appears to be overvalued by 31% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$120.53 on the market compared to my intrinsic value of $92.2. This means that the opportunity to buy Dr Pepper Snapple Group at a good price has disappeared! In addition to this, it seems like Dr Pepper Snapple Group’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What does the future of Dr Pepper Snapple Group look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. However, with a negative profit growth of -4.42% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Dr Pepper Snapple Group. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? If you believe DPS is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, this could be the right time to reduce your total portfolio risk. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on DPS for a while, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Dr Pepper Snapple Group. You can find everything you need to know about Dr Pepper Snapple Group in the latest infographic research report. If you are no longer interested in Dr Pepper Snapple Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.