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Is It Time To Consider Buying DLH Holdings Corp. (NASDAQ:DLHC)?

Simply Wall St

DLH Holdings Corp. (NASDAQ:DLHC), which is in the professional services business, and is based in United States, saw a significant share price rise of over 20% in the past couple of months on the NASDAQCM. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at DLH Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for DLH Holdings

Is DLH Holdings still cheap?

Good news, investors! DLH Holdings is still a bargain right now. 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 DLH Holdings’s ratio of 11.29x is below its peer average of 20.41x, which suggests the stock is undervalued compared to the Professional Services industry. What’s more interesting is that, DLH Holdings’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will DLH Holdings generate?

NasdaqCM:DLHC Past and Future Earnings, January 27th 2020
NasdaqCM:DLHC Past and Future Earnings, January 27th 2020

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. With profit expected to grow by 88% over the next couple of years, the future seems bright for DLH Holdings. 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 DLHC is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive 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 financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on DLHC for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy DLHC. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on DLH Holdings. You can find everything you need to know about DLH Holdings in the latest infographic research report. If you are no longer interested in DLH Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

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. Thank you for reading.