Dometic Group (OM:DOM): Assessing Valuation Following Profit Recovery in Latest Quarterly Results

Dometic Group (OM:DOM) just released its third quarter and nine-month financial results, catching investors’ attention with a meaningful swing back to profitability, even as overall sales declined compared to last year.

See our latest analysis for Dometic Group.

After a choppy stretch, Dometic’s turnaround to profitability in the latest quarter is noteworthy, but the momentum has not yet sparked an investor rally. The company’s 1-year total shareholder return stands at -16.07%, highlighting that while operational improvements are underway, the share price has yet to regain longer-term ground.

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With the share price still lagging and the latest earnings showing marked improvement, the question now is whether Dometic’s stock remains undervalued or if the market has already factored in its turnaround prospects.

Price-to-Sales of 0.7x: Is it justified?

Dometic Group is currently trading at a price-to-sales (P/S) ratio of 0.7x, with the most recent closing price at SEK46.72. This puts the company’s valuation above the European Auto Components industry average.

The price-to-sales multiple measures how much investors are paying for each unit of the company’s sales. For auto components companies like Dometic, this ratio is a popular metric to assess whether the stock is attractively priced relative to its revenue profile, especially when earnings are volatile or negative.

At 0.7x, Dometic’s P/S is over twice the industry average of 0.3x, indicating a market expectation of strong future sales or operational leverage. However, when compared to the peer average of 1.8x, Dometic appears much cheaper. This may highlight possible underappreciation among its closest competitors. According to our fair ratio estimate, the market could realign toward a lower P/S level, as 0.3x is considered the fair price-to-sales ratio for the company.

Explore the SWS fair ratio for Dometic Group

Result: Price-to-Sales of 0.7x (ABOUT RIGHT)

However, persistently weak share performance and muted revenue growth could signal that the turnaround is more fragile than recent numbers suggest.

Find out about the key risks to this Dometic Group narrative.

Another View: SWS DCF Model Points to a Different Story

Looking at Dometic through the lens of our DCF model adds an interesting twist. The SWS DCF model suggests the shares are seriously undervalued, trading 53.6% below their estimated fair value of SEK100.75. This result stands in sharp contrast to what the sales-based valuation suggests.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Dometic Group for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 851 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Dometic Group Narrative

If you see things differently, or want to explore alternative angles, you can dive into the numbers and craft a personal story about Dometic in just minutes. Do it your way

A great starting point for your Dometic Group research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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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.

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