At UK£0.82, Is dotdigital Group Plc (LON:DOTD) Worth Looking At Closely?

dotdigital Group Plc (LON:DOTD), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the AIM. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine dotdigital Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out the opportunities and risks within the GB Software industry.

Is dotdigital Group Still Cheap?

The stock is currently trading at UK£0.82 on the share market, which means it is overvalued by 40% compared to my intrinsic value of £0.59. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since dotdigital Group’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 dotdigital Group?

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. With profit expected to grow by a double-digit 11% over the next couple of years, the outlook is positive for dotdigital Group. 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? DOTD’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe DOTD should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on DOTD for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for DOTD, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Since timing is quite important when it comes to individual stock picking, it's worth taking a look at what those latest analysts forecasts are. So feel free to check out our free graph representing analyst forecasts.

If you are no longer interested in dotdigital Group, 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.