When Should You Buy Dottikon Es Holding AG (VTX:DESN)?

Dottikon Es Holding AG (VTX:DESN), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the SWX. As a CHF3.0b market-cap stock, it seems odd Dottikon Es Holding is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Let’s examine Dottikon Es Holding’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Dottikon Es Holding

What's the opportunity in Dottikon Es Holding?

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. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Dottikon Es Holding’s ratio of 52.53x is trading slightly above its industry peers’ ratio of 51.62x, which means if you buy Dottikon Es Holding today, you’d be paying a relatively reasonable price for it. And if you believe that Dottikon Es Holding should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, Dottikon Es Holding’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What does the future of Dottikon Es Holding look like?

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. In Dottikon Es Holding's case, its revenues over the next few years are expected to grow by 48%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? DESN’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 track record of its management team. Have these factors changed since the last time you looked at DESN? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on DESN, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for DESN, 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.

So while earnings quality is important, it's equally important to consider the risks facing Dottikon Es Holding at this point in time. In terms of investment risks, we've identified 1 warning sign with Dottikon Es Holding, and understanding this should be part of your investment process.

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This article by Simply Wall St is general in nature. 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.
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