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China Distance Education Holdings Limited (NYSE:DL), which is in the consumer services business, and is based in China, received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to $6.74 at one point, and dropping to the lows of $5.1. 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 China Distance Education Holdings's current trading price of $5.25 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 China Distance Education Holdings’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 China Distance Education Holdings?
Great news for investors – China Distance Education Holdings is still trading at a fairly cheap price. 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 China Distance Education Holdings’s ratio of 13.63x is below its peer average of 26.47x, which suggests the stock is undervalued compared to the Consumer Services industry. What’s more interesting is that, China Distance Education Holdings’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from China Distance Education Holdings?
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. With profit expected to grow by 63% over the next year, the near-term future seems bright for China Distance Education 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 DL is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With an optimistic 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 capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on DL for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy DL. 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 buy.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on China Distance Education Holdings. You can find everything you need to know about China Distance Education Holdings in the latest infographic research report. If you are no longer interested in China Distance Education Holdings, 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.