Advertisement
Canada markets open in 8 hours 9 minutes
  • S&P/TSX

    21,837.18
    -12.02 (-0.06%)
     
  • S&P 500

    5,149.42
    +32.33 (+0.63%)
     
  • DOW

    38,790.43
    +75.63 (+0.20%)
     
  • CAD/USD

    0.7381
    -0.0008 (-0.11%)
     
  • CRUDE OIL

    82.57
    -0.15 (-0.18%)
     
  • Bitcoin CAD

    88,312.08
    -4,191.35 (-4.53%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • GOLD FUTURES

    2,162.20
    -2.10 (-0.10%)
     
  • RUSSELL 2000

    2,024.74
    -14.58 (-0.72%)
     
  • 10-Yr Bond

    4.3400
    0.0000 (0.00%)
     
  • NASDAQ futures

    18,179.25
    -52.25 (-0.29%)
     
  • VOLATILITY

    14.33
    -0.08 (-0.56%)
     
  • FTSE

    7,722.55
    -4.87 (-0.06%)
     
  • NIKKEI 225

    39,853.73
    +113.33 (+0.29%)
     
  • CAD/EUR

    0.6787
    -0.0005 (-0.07%)
     

Is It Time To Buy Diamond Estates Wines & Spirits Inc (CVE:DWS)?

Diamond Estates Wines & Spirits Inc (CVE:DWS), a beverage company based in Canada, led the TSXV gainers with a relatively large price hike in the past couple of weeks. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on Diamond Estates Wines & Spirits’s outlook and valuation to see if the opportunity still exists. View out our latest analysis for Diamond Estates Wines & Spirits

What is Diamond Estates Wines & Spirits worth?

According to my relative valuation model, the stock is currently overvalued. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Diamond Estates Wines & Spirits’s ratio of 65.8x is above its peer average of 26x, which suggests the stock is overvalued compared to the Beverage industry. Another thing to keep in mind is that Diamond Estates Wines & Spirits’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

Can we expect growth from Diamond Estates Wines & Spirits?

TSXV:DWS Future Profit June 26th 18
TSXV:DWS Future Profit June 26th 18

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. 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. Diamond Estates Wines & Spirits’s revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? DWS’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe DWS should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

ADVERTISEMENT

Are you a potential investor? If you’ve been keeping tabs on DWS for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for DWS, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Diamond Estates Wines & Spirits. You can find everything you need to know about Diamond Estates Wines & Spirits in the latest infographic research report. If you are no longer interested in Diamond Estates Wines & Spirits, you can use our free platform to see my list of over 50 other stocks with a high growth potential.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.