Event context and recent performance snapshot

Distribution Solutions Group (DSGR) did not have a single headline event driving attention today. However, recent returns and fundamentals give you a few concrete data points to work with.

The stock closed at US$30.84, with a roughly flat move over the past week and a small gain over the past month. Over the past 3 months, the share price shows a stronger positive return, while the total return over the past year is more muted compared with its 3 year total return record.

The 16.6% 3 month share price return and 10% year to date share price return at around US$30.84 sit alongside a 3 year total shareholder return of 31.8%. This points to momentum that has been building over time as investors reassess both growth prospects and risks.

If DSGR has you thinking about where else steady momentum could appear, it might be a good time to broaden your search with our 23 top founder-led companies.

So, with recent returns appearing steady and the current price sitting below analyst expectations but close to some intrinsic estimates, should you view DSGR as an undervalued entry point, or has the market already accounted for potential future growth in the price?

Most Popular Narrative: 19.9% Undervalued

At $30.84, Distribution Solutions Group is trading below the most followed fair value estimate of $38.50. This estimate is based on a detailed cash flow narrative built using a 9.3% discount rate and analyst expectations for earnings and margins over the next few years.

Execution of large-scale digital salesforce and operational transformation initiatives such as upgraded CRM, data analytics, and a revamped web platform are expected to drive sustained organic revenue growth, enhance sales rep productivity, and support higher EBITDA/net margins as progress continues and benefits become fully realized.

Want to see what kind of revenue path, margin lift and future earnings multiple are built into that fair value? The narrative leans heavily on compounding changes in profitability, mix of higher value services and a different profit baseline than today. Curious what has to go right for those numbers to line up?

Result: Fair Value of $38.50 (UNDERVALUED)

However, this hinges on acquisitions bedding down smoothly and Lawson's sales transformation paying off, with any stumbles risking weaker margins and softer earnings than expected.

Another way to look at value

While the popular narrative points to a fair value of $38.50 using cash flows and analyst assumptions, the current P/S of 0.7x tells a different story. That is well below the US Trade Distributors industry at 1.4x and the 2x peer average, and also below the 1.2x fair ratio our model suggests the market could move toward. For you, that gap can look like a margin of safety or a signal that earnings quality, balance sheet risk, or execution questions still hang over the stock. Which side of that equation do you think matters more right now?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Distribution Solutions Group for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 53 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Distribution Solutions Group Narrative

If you look at these numbers and come to a different conclusion, or simply prefer to test your own assumptions quickly, you can build a custom view of DSGR with our Do it your way in just a few minutes.

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Distribution Solutions Group.

Looking for more investment ideas?

If DSGR has sharpened your focus, do not stop here. Broaden your watchlist with a few targeted sets of stocks surfaced by the Simply Wall St Screener.

• Spot potential value opportunities early by checking out our 53 high quality undervalued stocks that currently stand out on both quality and pricing signals.
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• Get ahead of the crowd by reviewing a screener containing 23 high quality undiscovered gems that still sit off most investors' radar but pass key fundamental checks.

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.