At US$19.15, Is Dream Finders Homes, Inc. (NYSE:DFH) Worth Looking At Closely?

Dream Finders Homes, Inc. (NYSE:DFH), might not be a large cap stock, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$30.50 and falling to the lows of US$18.59. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Dream Finders Homes' current trading price of US$19.15 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Dream Finders Homes’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Dream Finders Homes

What Is Dream Finders Homes 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 6.88x is currently trading in-line with its industry peers’ ratio, which means if you buy Dream Finders Homes today, you’d be paying a relatively sensible price for it. Although, there may be an opportunity to buy in the future. This is because Dream Finders Homes’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Dream Finders Homes?

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. Dream Finders Homes' earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? DFH’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 DFH? 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 DFH, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for DFH, 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.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. In terms of investment risks, we've identified 3 warning signs with Dream Finders Homes, and understanding them should be part of your investment process.

If you are no longer interested in Dream Finders Homes, 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.