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Dassault Systèmes SE (EPA:DSY) received a lot of attention from a substantial price movement on the ENXTPA over the last few months, increasing to €146 at one point, and dropping to the lows of €125. 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 Dassault Systèmes's current trading price of €125 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Dassault Systèmes’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 Dassault Systèmes
What's the opportunity in Dassault Systèmes?
According to my relative valuation model, the stock is currently overvalued. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Dassault Systèmes’s ratio of 54.07x is above its peer average of 29x, which suggests the stock is overvalued compared to the Software industry. Another thing to keep in mind is that Dassault Systèmes’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 Dassault Systèmes?
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. Dassault Systèmes’s earnings over the next few years are expected to increase by 50%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? DSY’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe DSY 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.