At US$16.29, Is DLH Holdings Corp. (NASDAQ:DLHC) Worth Looking At Closely?
DLH Holdings Corp. (NASDAQ:DLHC), might not be a large cap stock, but it saw a significant share price rise of 25% in the past couple of months on the NASDAQCM. The company's trading levels have reached its high for the past year, following the recent bounce in the share price. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine DLH Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
View our latest analysis for DLH Holdings
What's The Opportunity In DLH Holdings?
According to our valuation model, DLH Holdings seems to be fairly priced at around 12% below our intrinsic value, which means if you buy DLH Holdings today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $18.51, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that DLH Holdings’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 DLH 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. DLH Holdings' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? DLHC’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on DLHC, now may not be the most advantageous 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 diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've found that DLH Holdings has 4 warning signs (1 makes us a bit uncomfortable!) that deserve your attention before going any further with your analysis.
If you are no longer interested in DLH Holdings, 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.
