At UK£2.00, Is It Time To Put dotdigital Group Plc (LON:DOTD) On Your Watch List?

dotdigital Group Plc (LON:DOTD), might not be a large cap stock, but it saw significant share price movement during recent months on the AIM, rising to highs of UK£2.92 and falling to the lows of UK£2.00. 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 dotdigital Group's current trading price of UK£2.00 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 dotdigital Group’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 dotdigital Group

Is dotdigital Group still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 1.75% above my intrinsic value, which means if you buy dotdigital Group today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth £1.97, there’s only an insignificant downside when the price falls to its real value. What's more, dotdigital Group’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What kind of growth will dotdigital Group 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 a double-digit 14% 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? It seems like the market has already priced in DOTD’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on DOTD, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into dotdigital Group, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for dotdigital Group and we think they deserve your attention.

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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.