When Should You Buy D2L Inc. (TSE:DTOL)?

While D2L Inc. (TSE:DTOL) might not have the largest market cap around , it saw significant share price movement during recent months on the TSX, rising to highs of CA$18.94 and falling to the lows of CA$14.94. 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 D2L's current trading price of CA$14.94 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at D2L’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

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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. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 19.64x is currently trading slightly above its industry peers’ ratio of 17.79x, which means if you buy D2L today, you’d be paying a relatively reasonable price for it. And if you believe D2L should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that D2L’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.

Check out our latest analysis for D2L

What kind of growth will D2L generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Though in the case of D2L, it is expected to deliver a highly negative earnings growth in the upcoming, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? DTOL seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk 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 advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, 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 gel your views on DTOL should the price fluctuate below the industry PE ratio.

If you want to dive deeper into D2L, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for D2L and you'll want to know about this.

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.