Should You Investigate DouYu International Holdings Limited (NASDAQ:DOYU) At US$0.79?

While DouYu International Holdings Limited (NASDAQ:DOYU) might not have the largest market cap around , it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine DouYu International Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for DouYu International Holdings

What Is DouYu International Holdings 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 DouYu International Holdings’s ratio of 12.71x is trading slightly below its industry peers’ ratio of 15.87x, which means if you buy DouYu International Holdings today, you’d be paying a decent price for it. And if you believe that DouYu International Holdings should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. So, is there another chance to buy low in the future? Given that DouYu International Holdings’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 does the future of DouYu International Holdings look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of DouYu International Holdings, it is expected to deliver a negative earnings growth of -0.3%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Currently, DOYU appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on DOYU, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on DOYU for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on DOYU should the price fluctuate below the industry PE ratio.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that DouYu International Holdings has 2 warning signs and it would be unwise to ignore them.

If you are no longer interested in DouYu International Holdings, 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.