Stock Analysis

Why Koninklijke DSM N.V. (AMS:DSM) Could Be Worth Watching

ENXTAM:DSM
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Let's talk about the popular Koninklijke DSM N.V. (AMS:DSM). The company's shares received a lot of attention from a substantial price movement on the ENXTAM over the last few months, increasing to €156 at one point, and dropping to the lows of €116. 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 Koninklijke DSM's current trading price of €116 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Koninklijke DSM’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 Koninklijke DSM

Is Koninklijke DSM Still Cheap?

According to my valuation model, Koninklijke DSM seems to be fairly priced at around 0.4% below my intrinsic value, which means if you buy Koninklijke DSM today, you’d be paying a fair price for it. And if you believe the company’s true value is €116.80, then there isn’t much room for the share price grow beyond what it’s currently trading. In addition to this, Koninklijke DSM has a low beta, which suggests its share price is less volatile than the wider market.

Can we expect growth from Koninklijke DSM?

earnings-and-revenue-growth
ENXTAM:DSM Earnings and Revenue Growth September 19th 2022

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. However, with a negative profit growth of -18% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Koninklijke DSM. This certainty tips the risk-return scale towards higher risk.

What This Means For You

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

Are you a potential investor? If you’ve been keeping an eye on DSM for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, 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 DSM should the price fluctuate below its true value.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 1 warning sign for Koninklijke DSM you should be aware of.

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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.