DFS Furniture plc (LON:DFS), is not the largest company out there, but it received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£2.41 at one point, and dropping to the lows of UK£2.05. 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 DFS Furniture's current trading price of UK£2.19 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 DFS Furniture’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 DFS Furniture
Is DFS Furniture still cheap?
Great news for investors – DFS Furniture is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is £2.91, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, DFS Furniture’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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.
Can we expect growth from DFS Furniture?
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. In DFS Furniture's case, its revenues over the next few years are expected to grow by 46%, 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? Since DFS is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic 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 undervaluation.
Are you a potential investor? If you’ve been keeping an eye on DFS for a while, now might be the time to enter the stock. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy DFS. 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 investment decision.
If you want to dive deeper into DFS Furniture, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 2 warning signs with DFS Furniture, and understanding them 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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About LSE:DFS
DFS Furniture
Designs, manufactures, delivers, installs, and retails upholstered furniture in the United Kingdom and the Republic of Ireland.
Undervalued with reasonable growth potential.
