First Defiance Financial Corp. (NASDAQ:FDEF), operating in the financial services industry based in United States, received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at First Defiance Financial’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Is First Defiance Financial still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. 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 First Defiance Financial’s ratio of 13.69x is trading slightly below its industry peers’ ratio of 15.48x, which means if you buy First Defiance Financial today, you’d be paying a reasonable price for it. And if you believe First Defiance Financial should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. Furthermore, it seems like First Defiance Financial’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What does the future of First Defiance Financial look like?
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. However, with a relatively muted profit growth of 5.5% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for First Defiance Financial, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in FDEF’s growth outlook, with shares trading around its fair value. 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 FDEF? Will you have enough conviction to buy should the price fluctuate below the true value?
Are you a potential investor? If you’ve been keeping an eye on FDEF, now may not be the most advantageous time to buy, given it is trading around its fair value. 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on First Defiance Financial. You can find everything you need to know about First Defiance Financial in the latest infographic research report. If you are no longer interested in First Defiance Financial, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.