At UK£1.69, Is It Time To Put dotdigital Group Plc (LON:DOTD) On Your Watch List?

While dotdigital Group Plc (LON:DOTD) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the AIM over the last few months, increasing to UK£1.91 at one point, and dropping to the lows of UK£1.60. 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 dotdigital Group's current trading price of UK£1.69 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 dotdigital Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for dotdigital Group

What's the opportunity in dotdigital Group?

According to my valuation model, the stock is currently overvalued by about 24%, trading at UK£1.69 compared to my intrinsic value of £1.36. This means that the opportunity to buy dotdigital Group at a good price has disappeared! Furthermore, dotdigital Group’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What does the future of dotdigital Group look like?

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. However, with a relatively muted profit growth of 6.1% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for dotdigital Group, at least in the short term.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in DOTD’s future outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I 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 tabs on DOTD for some time, 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 positive outlook means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

It can be quite valuable to consider what analysts expect for dotdigital Group from their most recent forecasts. So feel free to check out our free graph representing analyst forecasts.

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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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