What Is Destination XL Group, Inc.'s (NASDAQ:DXLG) Share Price Doing?
Destination XL Group, Inc. (NASDAQ:DXLG), might not be a large cap stock, but it saw significant share price movement during recent months on the NASDAQGM, rising to highs of US$5.24 and falling to the lows of US$4.16. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Destination XL Group's current trading price of US$4.50 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 Destination XL Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Destination XL Group
What's The Opportunity In Destination XL Group?
According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 7.27x is currently trading slightly below its industry peers’ ratio of 12.21x, which means if you buy Destination XL Group today, you’d be paying a decent price for it. And if you believe Destination XL Group should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Destination XL Group’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Destination XL Group generate?
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. Though in the case of Destination XL Group, it is expected to deliver a relatively unexciting earnings growth of 4.7%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What This Means For You
Are you a shareholder? It seems like the market has already priced in DXLG’s growth outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at DXLG? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on DXLG, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Destination XL Group.
If you are no longer interested in Destination XL Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
