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DIRTT Environmental Solutions Ltd. (TSE:DRT), which is in the building business, and is based in Canada, received a lot of attention from a substantial price increase on the TSX over the last few months. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine DIRTT Environmental Solutions’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Is DIRTT Environmental Solutions still cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 17% below my intrinsic value, which means if you buy DIRTT Environmental Solutions today, you’d be paying a fair price for it. And if you believe that the stock is really worth CA$8.96, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that DIRTT Environmental Solutions’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from DIRTT Environmental Solutions?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 revenues expected to grow by a double-digit 30% over the next couple of years, the outlook is positive for DIRTT Environmental Solutions. If the level of expenses is able to be maintained, 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? It seems like the market has already priced in DRT’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on DRT, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on DIRTT Environmental Solutions. You can find everything you need to know about DIRTT Environmental Solutions in the latest infographic research report. If you are no longer interested in DIRTT Environmental Solutions, 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.