Why De'Longhi S.p.A. (BIT:DLG) Could Be Worth Watching

While De'Longhi S.p.A. (BIT:DLG) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the BIT over the last few months, increasing to €39.96 at one point, and dropping to the lows of €35.24. 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 De'Longhi's current trading price of €35.38 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at De'Longhi’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 De'Longhi

What's the opportunity in De'Longhi?

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 15.7x is currently trading slightly below its industry peers’ ratio of 19.76x, which means if you buy De'Longhi today, you’d be paying a reasonable price for it. And if you believe De'Longhi should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. In addition to this, it seems like De'Longhi’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will De'Longhi 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 1.7% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for De'Longhi, at least in the short term.

What this means for you:

Are you a shareholder? DLG’s future growth appears to have been factored into the current share price, 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 DLG? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on DLG, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into De'Longhi, you'd also look into what risks it is currently facing. For example - De'Longhi has 2 warning signs we think you should be aware of.

If you are no longer interested in De'Longhi, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

If you’re looking to trade De'Longhi, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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