Yahoo Finance Should You Think About Buying Dusk Group Limited (ASX:DSK) Now?
While Dusk Group Limited (ASX:DSK) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the ASX over the last few months, increasing to AU$2.41 at one point, and dropping to the lows of AU$1.75. 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 Dusk Group's current trading price of AU$1.82 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 Dusk Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Dusk Group
What Is Dusk Group Worth?
The share price seems sensible at the moment 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 6.13x is currently trading slightly below its industry peers’ ratio of 9.99x, which means if you buy Dusk Group today, you’d be paying a reasonable price for it. And if you believe that Dusk Group 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 Dusk Group’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.
Can we expect growth from Dusk Group?
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 a negative profit growth of -6.2% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Dusk Group. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Currently, DSK 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 DSK, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on DSK for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, 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 DSK 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. To that end, you should learn about the 3 warning signs we've spotted with Dusk Group (including 1 which is potentially serious).
If you are no longer interested in Dusk Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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