Looking at Distribuidora Internacional de Alimentación SA’s (BME:DIA) fundamentals some investors are wondering if its last closing price of €2.003 represents a good value for money for this high growth stock. Let’s look into this by assessing DIA’s expected growth over the next few years.
Check out our latest analysis for Distribuidora Internacional de Alimentación
Has the DIA train has slowed down?
Investors in Distribuidora Internacional de Alimentación have been patiently waiting for the uptick in earnings. If you believe the analysts covering the stock then the following year will be very interesting. Expectations from 18 analysts are certainly positive with earnings per share estimated to rise from today’s level of €0.131 to €0.246 over the next three years. This indicates an estimated earnings growth rate of 14.22% per year, on average, which indicates a solid future in the near term.Is DIA’s share price justified by its earnings growth?
Stocks like Distribuidora Internacional de Alimentación, with a price-to-earnings (P/E) ratio of 15.28x, always catch the eye of investors on the hunt for a bargain. In isolation, this metric can be a bit too simplistic but in comparison to benchmarks, it tells us that DIA is undervalued relative to the current ES market average of 19.04x , and undervalued based on its latest annual earnings update compared to the consumer retailing average of 19.87x . Since the sector in is relatively small, I’ve included similar companies in the wider region in order to get a better idea of the multiple, which is a median of profitable companies of companies such as , and .
Distribuidora Internacional de Alimentación’s price-to-earnings ratio stands at 15.28x, which is low, relative to the industry average. This already suggests that the stock could be undervalued. But, since Distribuidora Internacional de Alimentación is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 15.28x and expected year-on-year earnings growth of 14.22% give Distribuidora Internacional de Alimentación an acceptable PEG ratio of 1.07x. This means that, when we account for Distribuidora Internacional de Alimentación’s growth, the stock can be viewed as slightly overvalued , based on the fundamentals.
What this means for you:
DIA’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:
- Financial Health: Are DIA’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Past Track Record: Has DIA been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of DIA’s historicals for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.