Is It Too Late To Consider Buying Danaos Corporation (NYSE:DAC)?

Danaos Corporation (NYSE:DAC), 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$97.07 and falling to the lows of US$76.38. 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 Danaos' current trading price of US$81.16 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 Danaos’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 Danaos

What Is Danaos Worth?

Good news, investors! Danaos is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. We’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 2.73x is currently well-below the industry average of 6.01x, meaning that it is trading at a cheaper price relative to its peers. Although, there may be another chance to buy again in the future. This is because Danaos’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 Danaos?

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. 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 Danaos, at least in the near future.

What This Means For You

Are you a shareholder? Although DAC is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. We recommend you think about whether you want to increase your portfolio exposure to DAC, 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 tabs on DAC for some time, but hesitant on making the leap, we 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.

If you want to dive deeper into Danaos, you'd also look into what risks it is currently facing. Our analysis shows 2 warning signs for Danaos (1 is concerning!) and we strongly recommend you look at them before investing.

If you are no longer interested in Danaos, 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.