Is Now An Opportune Moment To Examine DFDS A/S (CPH:DFDS)?

DFDS A/S (CPH:DFDS), might not be a large cap stock, but it saw significant share price movement during recent months on the CPSE, rising to highs of kr.210 and falling to the lows of kr.167. 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 DFDS' current trading price of kr.167 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 DFDS’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 DFDS

What's The Opportunity In DFDS?

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 8.54x is currently trading slightly above its industry peers’ ratio of 7.55x, which means if you buy DFDS today, you’d be paying a relatively reasonable price for it. And if you believe that DFDS should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Although, there may be an opportunity to buy in the future. This is because DFDS’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 DFDS?

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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. DFDS' earnings over the next few years are expected to increase by 62%, 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? It seems like the market has already priced in DFDS’s positive outlook, 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 DFDS? 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 DFDS, 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 DFDS, 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 DFDS at this point in time. For instance, we've identified 3 warning signs for DFDS (1 shouldn't be ignored) you should be familiar with.

If you are no longer interested in DFDS, 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.