Why Development Works Food Co. Ltd (TADAWUL:9501) Could Be Worth Watching

Development Works Food Co. Ltd (TADAWUL:9501), is not the largest company out there, but it led the SASE gainers with a relatively large price hike in the past couple of weeks. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on Development Works Food’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Development Works Food

What's the opportunity in Development Works Food?

According to my valuation model, Development Works Food seems to be fairly priced at around 13.97% above my intrinsic value, which means if you buy Development Works Food today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is SAR183.38, then there isn’t really any room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Development Works Food’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.

What does the future of Development Works Food look like?

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 revenue growth of 7.7% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Development Works Food, at least in the short term.

What this means for you:

Are you a shareholder? 9501’s future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on 9501, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Development Works Food as a business, it's important to be aware of any risks it's facing. Be aware that Development Works Food is showing 3 warning signs in our investment analysis and 1 of those makes us a bit uncomfortable...

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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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