At UK£1.00, Is It Time To Put De La Rue plc (LON:DLAR) On Your Watch List?

While De La Rue plc (LON:DLAR) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the LSE, rising to highs of UK£1.18 and falling to the lows of UK£1.00. 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 De La Rue's current trading price of UK£1.00 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 De La Rue’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for De La Rue

Is De La Rue still cheap?

Good news, investors! De La Rue is still a bargain right now according to my price multiple model, which compares 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 De La Rue’s ratio of 13.62x is below its peer average of 29.42x, which indicates the stock is trading at a lower price compared to the Commercial Services industry. However, given that De La Rue’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of De La Rue look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to more than double over the next couple of years, the future seems bright for De La Rue. 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? Since DLAR is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on DLAR for a while, now might be the time to make a leap. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy DLAR. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 2 warning signs with De La Rue, and understanding them should be part of your investment process.

If you are no longer interested in De La Rue, 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.