Douglas Dynamics, Inc. (NYSE:PLOW), which is in the machinery business, and is based in United States, received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to $47.4 at one point, and dropping to the lows of $35.49. 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 Douglas Dynamics’s current trading price of $35.97 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 Douglas Dynamics’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Douglas Dynamics still cheap?
According to my valuation model, Douglas Dynamics seems to be fairly priced at around 9.9% below my intrinsic value, which means if you buy Douglas Dynamics today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $39.9, then there’s not much of an upside to gain from mispricing. Furthermore, Douglas Dynamics’s low beta implies that the stock is less volatile than the wider market.
Can we expect growth from Douglas Dynamics?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Douglas Dynamics, at least in the near future.
What this means for you:
Are you a shareholder? PLOW seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on PLOW for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on PLOW should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Douglas Dynamics. You can find everything you need to know about Douglas Dynamics in the latest infographic research report. If you are no longer interested in Douglas Dynamics, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.