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Today we're going to take a look at the well-established Dover Corporation (NYSE:DOV). The company's stock received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$163 at one point, and dropping to the lows of US$129. 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 Dover's current trading price of US$133 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Dover’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Dover worth?
Great news for investors – Dover is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Dover’s ratio of 17.22x is below its peer average of 22.3x, which indicates the stock is trading at a lower price compared to the Machinery industry. What’s more interesting is that, Dover’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Dover?
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. With profit expected to grow by a double-digit 18% over the next couple of years, the outlook is positive for Dover. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? Since DOV is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on DOV for a while, now might be the time to enter the stock. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy DOV. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. While conducting our analysis, we found that Dover has 2 warning signs and it would be unwise to ignore these.
If you are no longer interested in Dover, 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.