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Driver Group plc (LON:DRV), is not the largest company out there, but it received a lot of attention from a substantial price increase on the AIM over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today we will analyse the most recent data on Driver Group’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for Driver Group
Is Driver Group Still Cheap?
Driver Group appears to be overvalued by 28% at the moment, based on our discounted cash flow valuation. The stock is currently priced at UK£0.28 on the market compared to our intrinsic value of £0.22. This means that the opportunity to buy Driver Group at a good price has disappeared! Furthermore, Driver Group’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What kind of growth will Driver 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. 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 in the upcoming, the future appears to be extremely bright for Driver Group. 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? It seems like the market has well and truly priced in DRV’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe DRV 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.
Are you a potential investor? If you’ve been keeping an eye on DRV for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for DRV, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.