Donaldson Company, Inc. (NYSE:DCI), which is in the machinery business, and is based in United States, saw its share price hover around a small range of $46.8 to $50.86 over the last few weeks. But is this actually reflective of the share value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Donaldson Company’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in Donaldson Company?
According to my valuation model, Donaldson Company seems to be fairly priced at around 0.3% below my intrinsic value, which means if you buy Donaldson Company today, you’d be paying a fair price for it. And if you believe that the stock is really worth $48.66, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Donaldson Company’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Donaldson Company 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 relatively muted profit growth of 9.3% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Donaldson Company, at least in the short term.
What this means for you:
Are you a shareholder? DCI’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 track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on DCI, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Donaldson Company. You can find everything you need to know about Donaldson Company in the latest infographic research report. If you are no longer interested in Donaldson Company, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.