Is Now The Time To Look At Buying Ducommun Incorporated (NYSE:DCO)?

While Ducommun Incorporated (NYSE:DCO) might not be the most widely known stock at the moment, it led the NYSE gainers with a relatively large price hike in the past couple of weeks. As a small cap stock, which tends to lack high analyst coverage, 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? Today I will analyse the most recent data on Ducommun’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Ducommun

What's The Opportunity In Ducommun?

Great news for investors – Ducommun is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 5.17x is currently well-below the industry average of 24.6x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Ducommun’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 Ducommun?

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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Ducommun, at least in the near future.

What This Means For You

Are you a shareholder? Although DCO is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to DCO, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on DCO for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For instance, we've identified 4 warning signs for Ducommun (3 are potentially serious) you should be familiar with.

If you are no longer interested in Ducommun, 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.