At CA$15.67, Is D2L Inc. (TSE:DTOL) Worth Looking At Closely?

While D2L Inc. (TSE:DTOL) might not have the largest market cap around , it led the TSX gainers with a relatively large price hike in the past couple of weeks. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at D2L’s outlook and value based on the most recent financial data to see if the opportunity still exists.

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Is D2L Still Cheap?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that D2L’s ratio of 21.99x is trading slightly above its industry peers’ ratio of 18.82x, which means if you buy D2L today, you’d be paying a relatively sensible price for it. And if you believe that D2L should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Is there another opportunity to buy low in the future? Since D2L’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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.

Check out our latest analysis for D2L

What kind of growth will D2L generate?

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. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for D2L, at least in the near future.

What This Means For You

Are you a shareholder? Currently, DTOL appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on DTOL, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on DTOL for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on DTOL should the price fluctuate below the industry PE ratio.

If you'd like to know more about D2L as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 1 warning sign for D2L and you'll want to know about it.

If you are no longer interested in D2L, 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.