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Dole plc (NYSE:DOLE), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. While good news for shareholders, the company has traded much higher in the past year. As a small cap stock, which tends to lack high analyst coverage, 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? Let’s take a look at Dole’s outlook and value based on the most recent financial data to see if the opportunity still exists.
See our latest analysis for Dole
What Is Dole Worth?
Good news, investors! Dole is still a bargain right now according to our price multiple model, which compares 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 8.68x is currently well-below the industry average of 19.18x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Dole’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Dole generate?
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. However, with a negative profit growth of -0.5% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Dole. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although DOLE is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to DOLE, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on DOLE for a while, but hesitant on making the leap, we recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.