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Dime Community Bancshares, Inc. (NASDAQ:DCOM), operating in the financial services industry based in United States, received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to $20.21 at one point, and dropping to the lows of $17.75. 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 Dime Community Bancshares's current trading price of $18.22 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 Dime Community Bancshares’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in Dime Community Bancshares?
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 Dime Community Bancshares’s ratio of 13.94x is trading slightly above its industry peers’ ratio of 13.92x, which means if you buy Dime Community Bancshares today, you’d be paying a relatively reasonable price for it. And if you believe Dime Community Bancshares should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, Dime Community Bancshares’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What kind of growth will Dime Community Bancshares 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. However, with a negative profit growth of -0.6% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Dime Community Bancshares. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? DCOM 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 DCOM, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on DCOM for a while, now may not be the most optimal 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. In addition to this, 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 gel your views on DCOM 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 Dime Community Bancshares. You can find everything you need to know about Dime Community Bancshares in the latest infographic research report. If you are no longer interested in Dime Community Bancshares, 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 firstname.lastname@example.org. 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.