Is Christian Dior SE (EPA:CDI) Potentially Undervalued?

Today we're going to take a look at the well-established Christian Dior SE (EPA:CDI). The company's stock led the ENXTPA gainers with a relatively large price hike in the past couple of weeks. As a large-cap stock, it seems odd Christian Dior 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 take a look at Christian Dior’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Christian Dior

What is Christian Dior worth?

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. 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 Christian Dior’s ratio of 43.58x is trading in-line with its industry peers’ ratio, which means if you buy Christian Dior today, you’d be paying a relatively sensible price for it. Furthermore, it seems like Christian Dior’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Christian Dior 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. With profit expected to grow by 72% over the next couple of years, the future seems bright for Christian Dior. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? CDI’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 CDI? 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 CDI, 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 CDI, which means it’s worth diving deeper into 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 Christian Dior at this point in time. At Simply Wall St, we found 1 warning sign for Christian Dior and we think they deserve your attention.

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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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