Is Now An Opportune Moment To Examine Del Monte Pacific Limited (SGX:D03)?

Del Monte Pacific Limited (SGX:D03), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the SGX. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Del Monte Pacific’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Del Monte Pacific

What Is Del Monte Pacific Worth?

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 8.22x is currently trading slightly below its industry peers’ ratio of 9.41x, which means if you buy Del Monte Pacific today, you’d be paying a decent price for it. And if you believe Del Monte Pacific 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. Furthermore, it seems like Del Monte Pacific’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Del Monte Pacific?

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. In Del Monte Pacific's case, its earnings over the next year are expected to double, indicating an incredibly optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? D03’s optimistic 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 financial strength of the company. Have these factors changed since the last time you looked at D03? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on D03, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for D03, which 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 want to dive deeper into Del Monte Pacific, you'd also look into what risks it is currently facing. Case in point: We've spotted 2 warning signs for Del Monte Pacific you should be mindful of and 1 of them is significant.

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

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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.