Develop Global (ASX:DVP) Joins Key Indexes, Is It Still A Bargain?
Develop Global (ASX:DVP) has been added to both the S&P/ASX 200 Index and the S&P/ASX 200 Materials Sector Index, a change that can influence trading activity through index-tracking fund flows.
See our latest analysis for Develop Global.
At a latest share price of A$6.03, Develop Global has seen a 1-day share price return of 4.69% and a year to date share price return of 32.82%. The 3 year total shareholder return of 75.80% points to stronger longer term gains, suggesting recent index inclusion has come on top of an already building trend rather than creating it from scratch.
If this index move has you looking beyond a single stock, it could be a good time to scan for other materials names through the 8 top copper producer stocks
After a strong run, fuelled in part by index inclusion and a recent jump to A$6.03, the real tension for Develop Global now is simple: pay up today, or wait and hope for a better entry as the valuation case unfolds next?
Most Popular Narrative: 15.7% Undervalued
Against a last close of A$6.03, the most followed narrative for Develop Global anchors on a fair value of A$7.15, built using an 8.48% discount rate and detailed operating assumptions across its mines and services business.
The analysts have a consensus price target of A$7.15 for Develop Global based on their expectations of its future earnings growth, profit margins and other risk factors.
In order for you to agree with the analysts, you would need to believe that by 2029, revenues will be A$1.2 billion, earnings will come to A$306.7 million, and it would be trading on a PE ratio of 10.0x, assuming you use a discount rate of 8.5%.
Want to see what sits behind that A$7.15 fair value for Develop Global? The narrative leans on aggressive revenue compounding, expanding margins and a slimmer future earnings multiple that still supports this higher price.
Result: Fair Value of A$7.15 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, the Develop Global narrative could still be challenged if project financing terms tighten unexpectedly or if Woodlawn and Sulphur Springs ramp up more slowly than planned.
Find out about the key risks to this Develop Global narrative.
Another View On Develop Global's Valuation
The narrative work around Develop Global leans on future cash flows and a fair value of A$7.15, yet today the stock trades on a P/E of 27.2x versus 11x for the Australian metals and mining industry and a peer average of 22.2x, with a fair ratio of 26.5x suggesting only a small cushion. For investors, that gap points to higher valuation risk if sentiment cools even slightly. This raises the question of how comfortable you are with paying a premium while waiting for the earnings story to catch up.
See what the numbers say about this price — find out in our valuation breakdown.
Next Steps
With Develop Global presenting both potential upside and clear watch points, now is a good time to review the full picture and form your own stance by checking the 3 key rewards and 1 important warning sign
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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.
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