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While dotdigital Group Plc (LON:DOTD) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the AIM over the last few months, increasing to UK£0.96 at one point, and dropping to the lows of UK£0.81. 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 dotdigital Group's current trading price of UK£0.81 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 dotdigital 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 dotdigital Group
Is dotdigital Group Still Cheap?
Great news for investors – dotdigital Group is still trading at a fairly cheap price according to our price multiple model, where we compare 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 20.35x is currently well-below the industry average of 33.18x, meaning that it is trading at a cheaper price relative to its peers. However, given that dotdigital 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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will dotdigital Group generate?
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. dotdigital Group's 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? Since DOTD is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.