Is It Time To Consider Buying Diana Shipping Inc. (NYSE:DSX)?
Diana Shipping Inc. (NYSE:DSX), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$4.17 at one point, and dropping to the lows of US$3.51. 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 Diana Shipping's current trading price of US$3.69 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 Diana Shipping’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Diana Shipping
What Is Diana Shipping Worth?
Diana Shipping appears to be overvalued by 27% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$3.69 on the market compared to my intrinsic value of $2.90. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Given that Diana Shipping’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 Diana Shipping generate?
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. Though in the case of Diana Shipping, it is expected to deliver a negative revenue growth of -14% over the next couple of years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? If you believe DSX 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 risk from a negative growth outlook, 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 DSX for some time, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?
So while earnings quality is important, it's equally important to consider the risks facing Diana Shipping at this point in time. You'd be interested to know, that we found 3 warning signs for Diana Shipping and you'll want to know about these.
If you are no longer interested in Diana Shipping, 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.
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