Latest news with #DaythreeDigitalBerhad
Yahoo
31-03-2025
- Business
- Yahoo
Daythree Digital Berhad (KLSE:DAY3) Might Be Having Difficulty Using Its Capital Effectively
If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Although, when we looked at Daythree Digital Berhad (KLSE:DAY3), it didn't seem to tick all of these boxes. For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Daythree Digital Berhad: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.01 = RM809k ÷ (RM90m - RM11m) (Based on the trailing twelve months to December 2024). Therefore, Daythree Digital Berhad has an ROCE of 1.0%. Ultimately, that's a low return and it under-performs the Commercial Services industry average of 6.0%. Check out our latest analysis for Daythree Digital Berhad While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Daythree Digital Berhad. On the surface, the trend of ROCE at Daythree Digital Berhad doesn't inspire confidence. Over the last five years, returns on capital have decreased to 1.0% from 19% five years ago. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It may take some time before the company starts to see any change in earnings from these investments. In summary, Daythree Digital Berhad is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. And investors appear hesitant that the trends will pick up because the stock has fallen 23% in the last year. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere. Daythree Digital Berhad does have some risks though, and we've spotted 3 warning signs for Daythree Digital Berhad that you might be interested in. While Daythree Digital Berhad isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) 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.
Yahoo
03-03-2025
- Business
- Yahoo
A Look At The Fair Value Of Daythree Digital Berhad (KLSE:DAY3)
Daythree Digital Berhad's estimated fair value is RM0.24 based on Dividend Discount Model Current share price of RM0.28 suggests Daythree Digital Berhad is potentially trading close to its fair value Industry average of 367% suggests Daythree Digital Berhad's peers are currently trading at a higher premium to fair value How far off is Daythree Digital Berhad (KLSE:DAY3) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by taking the expected future cash flows and discounting them to their present value. We will use the Discounted Cash Flow (DCF) model on this occasion. Believe it or not, it's not too difficult to follow, as you'll see from our example! We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you. See our latest analysis for Daythree Digital Berhad As Daythree Digital Berhad operates in the commercial services sector, we need to calculate the intrinsic value slightly differently. In this approach dividends per share (DPS) are used, as free cash flow is difficult to estimate and often not reported by analysts. This often underestimates the value of a stock, but it can still be good as a comparison to competitors. We use the Gordon Growth Model, which assumes dividend will grow into perpetuity at a rate that can be sustained. For a number of reasons a very conservative growth rate is used that cannot exceed that of a company's Gross Domestic Product (GDP). In this case we used the 5-year average of the 10-year government bond yield (3.6%). The expected dividend per share is then discounted to today's value at a cost of equity of 9.6%. Relative to the current share price of RM0.3, the company appears around fair value at the time of writing. The assumptions in any calculation have a big impact on the valuation, so it is better to view this as a rough estimate, not precise down to the last cent. Value Per Share = Expected Dividend Per Share / (Discount Rate - Perpetual Growth Rate) = RM0.01 / (9.6% – 3.6%) = RM0.2 Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. If you don't agree with these result, have a go at the calculation yourself and play with the assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Daythree Digital Berhad as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 9.6%, which is based on a levered beta of 1.008. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. Strength Currently debt free. Weakness Earnings declined over the past year. Dividend is low compared to the top 25% of dividend payers in the Commercial Services market. Current share price is above our estimate of fair value. Opportunity DAY3's financial characteristics indicate limited near-term opportunities for shareholders. Lack of analyst coverage makes it difficult to determine DAY3's earnings prospects. Threat Paying a dividend but company has no free cash flows. Valuation is only one side of the coin in terms of building your investment thesis, and it is only one of many factors that you need to assess for a company. The DCF model is not a perfect stock valuation tool. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. For Daythree Digital Berhad, we've put together three fundamental aspects you should consider: Risks: Every company has them, and we've spotted 3 warning signs for Daythree Digital Berhad you should know about. Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! Other Top Analyst Picks: Interested to see what the analysts are thinking? Take a look at our interactive list of analysts' top stock picks to find out what they feel might have an attractive future outlook! PS. Simply Wall St updates its DCF calculation for every Malaysian stock every day, so if you want to find the intrinsic value of any other stock just search here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) 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.
