DPW Holdings Inc (AMEX:DPW), a electrical company based in United States, received a lot of attention from a substantial price increase on the AMEX over the last few months. 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 DPW Holdings’s outlook and valuation to see if the opportunity still exists. View our latest analysis for DPW Holdings
What’s the opportunity in DPW Holdings?
According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 3.49x is currently trading slightly above its industry peers’ ratio of 2.1x, which means if you buy DPW Holdings today, you’d be paying a relatively reasonable price for it. And if you believe DPW Holdings should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since DPW Holdings’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of DPW Holdings look like?
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. Though in the case of DPW Holdings, it is expected to deliver a relatively unexciting earnings growth of 4.32%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for DPW Holdings, at least in the near term.
What this means for you:
Are you a shareholder? DPW’s future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at DPW? Will you have enough confidence to invest in the company should the price drop below its fair value?