When Should You Buy dormakaba Holding AG (VTX:DOKA)?

While dormakaba Holding AG (VTX:DOKA) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the SWX over the last few months, increasing to CHF472 at one point, and dropping to the lows of CHF393. 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 dormakaba Holding's current trading price of CHF432 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 dormakaba Holding’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for dormakaba Holding

What is dormakaba Holding worth?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’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 17.85x is currently trading slightly below its industry peers’ ratio of 20.14x, which means if you buy dormakaba Holding today, you’d be paying a reasonable price for it. And if you believe dormakaba Holding should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because dormakaba Holding’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from dormakaba Holding?

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. dormakaba Holding's earnings over the next few years are expected to increase by 28%, 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? DOKA’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at DOKA? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on DOKA, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for DOKA, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into dormakaba Holding, you'd also look into what risks it is currently facing. At Simply Wall St, we found 2 warning signs for dormakaba Holding and we think they deserve your attention.

If you are no longer interested in dormakaba Holding, 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.