When Should You Buy Data#3 Limited (ASX:DTL)?

Data#3 Limited (ASX:DTL), is not the largest company out there, but it saw a decent share price growth of 12% on the ASX over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine Data#3’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Data#3

Is Data#3 Still Cheap?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 10% below our intrinsic value, which means if you buy Data#3 today, you’d be paying a fair price for it. And if you believe the company’s true value is A$9.21, then there isn’t much room for the share price grow beyond what it’s currently trading. In addition to this, Data#3 has a low beta, which suggests its share price is less volatile than the wider market.

Can we expect growth from Data#3?

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. Data#3's earnings over the next few years are expected to increase by 49%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in DTL’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 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 tabs on DTL, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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 while earnings quality is important, it's equally important to consider the risks facing Data#3 at this point in time. In terms of investment risks, we've identified 1 warning sign with Data#3, and understanding this should be part of your investment process.

If you are no longer interested in Data#3, 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.

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