Is Delegat Group Limited (NZE:DGL) Undervalued?
Delegat Group Limited (NZSE:DGL), a beverage company based in New Zealand, received a lot of attention from a substantial price movement on the NZSE in the over the last few months, increasing to NZ$8.05 at one point, and dropping to the lows of NZ$7.2. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Delegat Group’s current trading price of NZ$7.9 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Delegat Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View our latest analysis for Delegat Group
Is Delegat Group still cheap?
Delegat Group appears to be overvalued by 91% at the moment, based on my discounted cash flow valuation. The stock is currently priced at NZ$7.9 on the market compared to my intrinsic value of NZ$4.14. Not the best news for investors looking to buy! Another thing to keep in mind is that Delegat Group’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What kind of growth will Delegat Group generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Delegat Group’s earnings over the next few years are expected to increase by 33.99%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in Delegat Group’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe Delegat Group should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. 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 Delegat Group for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for Delegat Group, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Delegat Group. You can find everything you need to know about Delegat Group in the latest infographic research report. If you are no longer interested in Delegat 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.
