Is Now The Time To Look At Buying Denny's Corporation (NASDAQ:DENN)?
Denny's Corporation (NASDAQ:DENN), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NASDAQCM over the last few months, increasing to US$12.50 at one point, and dropping to the lows of US$10.52. 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 Denny's' current trading price of US$11.24 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 Denny's’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 Denny's
What Is Denny's Worth?
The stock is currently trading at US$11.24 on the share market, which means it is overvalued by 24% compared to my intrinsic value of $9.09. This means that the opportunity to buy Denny's at a good price has disappeared! But, is there another opportunity to buy low in the future? Given that Denny's’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Denny's generate?
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 next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Denny's, at least in the near future.
What This Means For You
Are you a shareholder? If you believe DENN 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. Given the uncertainty from negative growth in the future, this could be the right time to reduce your total portfolio risk. 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 tabs on DENN for some time, now may not be the best time to enter into the stock. The company’s price has climbed passed its true value, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 4 warning signs for Denny's (of which 1 doesn't sit too well with us!) you should know about.
If you are no longer interested in Denny's, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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