What Is Deluxe Corporation's (NYSE:DLX) Share Price Doing?

While Deluxe Corporation (NYSE:DLX) might not have the largest market cap around , it saw a significant share price rise of 27% in the past couple of months on the NYSE. The company is now trading at yearly-high levels following the recent surge in its share price. Less-covered, small caps sees 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? Let’s take a look at Deluxe’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Deluxe

What Is Deluxe Worth?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Deluxe’s ratio of 30.5x is trading slightly above its industry peers’ ratio of 28.72x, which means if you buy Deluxe today, you’d be paying a relatively reasonable price for it. And if you believe that Deluxe should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. So, is there another chance to buy low in the future? Given that Deluxe’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Deluxe generate?

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. With profit expected to more than double over the next couple of years, the future seems bright for Deluxe. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? DLX’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 track record of its management team. Have these factors changed since the last time you looked at DLX? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on DLX, 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 DLX, which means it’s worth further examining 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 Deluxe as a business, it's important to be aware of any risks it's facing. Our analysis shows 4 warning signs for Deluxe (1 doesn't sit too well with us!) and we strongly recommend you look at them before investing.

If you are no longer interested in Deluxe, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com