Why Dishman Carbogen Amcis Limited (NSE:DCAL) Could Be Worth Watching

While Dishman Carbogen Amcis Limited (NSE:DCAL) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the NSEI over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Dishman Carbogen Amcis’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Dishman Carbogen Amcis

Is Dishman Carbogen Amcis still cheap?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 60.48x is currently trading slightly above its industry peers’ ratio of 56.15x, which means if you buy Dishman Carbogen Amcis today, you’d be paying a relatively sensible price for it. And if you believe that Dishman Carbogen Amcis should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Although, there may be an opportunity to buy in the future. This is because Dishman Carbogen Amcis’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 does the future of Dishman Carbogen Amcis look like?

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. Dishman Carbogen Amcis' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in DCAL’s positive outlook, with shares trading around industry price multiples. 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 DCAL? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on DCAL, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for DCAL, 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.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. At Simply Wall St, we found 3 warning signs for Dishman Carbogen Amcis and we think they deserve your attention.

If you are no longer interested in Dishman Carbogen Amcis, 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. 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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