What is the stock price of Danaos Corporation (NYSE:DAC) doing?
Danaos Corporation (NYSE:DAC), may not be a large-cap stock, but it has seen significant price moves over the past several months on the NYSE, reaching highs of US$107 and falling to lows of US$71.04. Certain movements in the stock price can give investors a better opportunity to get into the stock and potentially buy at a lower price. A question that needs to be answered is whether the current Danaos trading price of US$71.04 reflects the true value of the small cap? Or is it currently undervalued, giving us the opportunity to buy? Let’s take a look at the outlook and value of Danaos based on the most recent financial data to see if there are any catalysts for a price change.
Discover our latest analysis for Danaos
What is Danaus worth?
According to my multiple price model, which compares the company’s price-earnings ratio to the industry average, the stock price seems justified. In this case, I used the Price/Earnings (PE) ratio since there is not enough information to reliably predict the stock’s cash flow. I find that Danaos ratio of 1.35x is trading slightly below the 3x ratio of its industry peers, which means that if you buy Danaos today you would pay a decent price for it. And if you think Danaos should be trading at this level for the long term, then there is not much upside to gain over other industry peers. So, is there another chance to buy low in the future? Since Danaos share is quite volatile (i.e. its price movements are amplified compared to the rest of the market), this could mean that the price may drop, giving us the opportunity to buy more late. This is based on its high beta, which is a good indicator of stock price volatility.
What type of growth will Danaos generate?
Future prospects are an important aspect when considering buying a stock, especially if you are an investor looking to grow your portfolio. Buying a big company with solid prospects at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. Although in the case of Danaos, it is expected to post very negative earnings growth in the coming years, which does not help to strengthen its investment thesis. It seems that the risk of future uncertainty is high, at least in the short term.
What does this mean to you :
Are you a shareholder? DAC currently appears to be priced close to its industry peers, but given the uncertainty of negative returns going forward, now could be a good time to de-risk your portfolio. Is your current exposure to the security optimal for your entire portfolio? And is the opportunity cost of holding a stock with a negative outlook too high? Before deciding on the DAC, check if its fundamentals have changed.
Are you a potential investor? If you’ve been keeping your eye on the DAC for a while, now might not be the best time to buy, given that it’s trading around industry price multiples. This means that there is less benefit from erroneous prices. Additionally, the negative growth outlook increases the risk of owning the stock. However, there are also other important factors that we have not considered today that may help narrow down your opinion of the DAC if the price fluctuates below the industry PE ratio.
So while the quality of earnings is important, it is equally important to consider the risks that Danaos faces at this stage. Our analysis shows 4 warning signs for Danaos (2 are not very good with us!) and we strongly recommend that you consult them before investing.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.