What Is Downer EDI Limited's (ASX:DOW) Share Price Doing?

While Downer EDI Limited (ASX:DOW) might not have the largest market cap around , it saw significant share price movement during recent months on the ASX, rising to highs of AU$5.10 and falling to the lows of AU$4.52. 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 Downer EDI's current trading price of AU$4.70 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Downer EDI’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Downer EDI

What's The Opportunity In Downer EDI?

Good news, investors! Downer EDI is still a bargain right now. According to our valuation, the intrinsic value for the stock is A$7.34, but it is currently trading at AU$4.70 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Downer EDI’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.

What does the future of Downer EDI look like?

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. However, with a relatively muted revenue growth of 9.0% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Downer EDI, at least in the short term.

What This Means For You

Are you a shareholder? Even though growth is relatively muted, since DOW is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. 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 DOW for a while, now might be the time to make a leap. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy DOW. 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.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - Downer EDI has 1 warning sign we think you should be aware of.

If you are no longer interested in Downer EDI, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.