Is There Now An Opportunity In DIC Asset AG (ETR:DIC)?

DIC Asset AG (ETR:DIC), is not the largest company out there, but it saw significant share price movement during recent months on the XTRA, rising to highs of €9.69 and falling to the lows of €6.11. 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 DIC Asset's current trading price of €6.11 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 DIC Asset’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for DIC Asset

Is DIC Asset Still Cheap?

According to my 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. 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 16.38x is currently trading slightly above its industry peers’ ratio of 16x, which means if you buy DIC Asset today, you’d be paying a relatively reasonable price for it. And if you believe that DIC Asset 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 DIC Asset’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.

What kind of growth will DIC Asset 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 over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for DIC Asset, at least in the near future.

What This Means For You

Are you a shareholder? DIC 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 reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on DIC, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on DIC 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. 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 DIC should the price fluctuate below the industry PE ratio.

So while earnings quality is important, it's equally important to consider the risks facing DIC Asset at this point in time. Case in point: We've spotted 4 warning signs for DIC Asset you should be mindful of and 2 of these are concerning.

If you are no longer interested in DIC Asset, 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.