While Diana Shipping Inc. ( NYSE:DSX ) might not have the largest market cap around , it saw significant share price movement during recent months on the NYSE, rising to highs of US$3.20 and falling to the lows of US$2.83. 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 Diana Shipping's current trading price of US$2.99 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 Diana Shipping’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 Diana Shipping

What Is Diana Shipping Worth?

Diana Shipping is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Diana Shipping’s ratio of 14.45x is above its peer average of 10.16x, which suggests the stock is trading at a higher price compared to the Shipping industry. But, is there another opportunity to buy low in the future? Since Diana Shipping’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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. It's also important to note that shareholders have been diluted by 14.8% over the previous 12 months, which has also impacted the price.

What kind of growth will Diana Shipping 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. With profit expected to more than double over the next couple of years, the future seems bright for Diana Shipping. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

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

Are you a potential investor? If you’ve been keeping tabs on DSX 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 DSX, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Diana Shipping at this point in time. To help with this, we've discovered 5 warning signs (2 are concerning!) that you ought to be aware of before buying any shares in Diana Shipping.

If you are no longer interested in Diana Shipping, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.