Is dotdigital Group Plc (LON:DOTD) Potentially Undervalued?

dotdigital Group Plc (LON:DOTD), is not the largest company out there, but it received a lot of attention from a substantial price movement on the AIM over the last few months, increasing to UK£0.95 at one point, and dropping to the lows of UK£0.68. 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£0.68 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 is dotdigital Group worth?

Good news, investors! dotdigital Group 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. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 17.05x is currently well-below the industry average of 40.29x, meaning that it is trading at a cheaper price relative to its peers. Although, there may be another chance to buy again in the future. This is because dotdigital Group’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

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. However, with a relatively muted profit growth of 4.5% 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? Even though growth is relatively muted, since DOTD is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. 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 DOTD for a while, now might be the time to enter the stock. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy DOTD. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

If you'd like to know more about dotdigital Group as a business, it's important to be aware of any risks it's 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.

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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.