Donaldson Company, Inc. (NYSE:DCI), 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. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Donaldson Company’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Donaldson Company

Is Donaldson Company still cheap?

Donaldson Company appears to be overvalued by 21% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$65.85 on the market compared to my intrinsic value of $54.40. Not the best news for investors looking to buy! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Donaldson Company’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.

Can we expect growth from Donaldson Company?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 48% over the next couple of years, the future seems bright for Donaldson Company. 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 DCI’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe DCI 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 tabs on DCI for some time, 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 positive outlook is encouraging for DCI, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Diving deeper into the forecasts for Donaldson Company mentioned earlier will help you understand how analysts view the stock going forward. So feel free to check out our free graph representing analyst forecasts.

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

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. 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.

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