Is There Now An Opportunity In Digital Bros S.p.A. (BIT:DIB)?

Digital Bros S.p.A. (BIT:DIB), is not the largest company out there, but it saw significant share price movement during recent months on the BIT, rising to highs of €23.15 and falling to the lows of €16.14. 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 Digital Bros' current trading price of €16.90 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 Digital Bros’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 Digital Bros

Is Digital Bros 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. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Digital Bros’s ratio of 12.05x is trading in-line with its industry peers’ ratio, which means if you buy Digital Bros today, you’d be paying a relatively reasonable price for it. Is there another opportunity to buy low in the future? Since Digital Bros’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Digital Bros?

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. Though in the case of Digital Bros, it is expected to deliver a negative earnings growth of -7.8%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Currently, DIB appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on DIB, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on DIB for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on DIB should the price fluctuate below the industry PE ratio.

If you want to dive deeper into Digital Bros, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Digital Bros, and understanding it should be part of your investment process.

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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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