What Does Iochpe-Maxion S.A.'s (BVMF:MYPK3) Share Price Indicate?

Iochpe-Maxion S.A. (BVMF:MYPK3), which is in the machinery business, and is based in Brazil, saw a significant share price rise of over 20% in the past couple of months on the BOVESPA. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at Iochpe-Maxion’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Iochpe-Maxion

What's the opportunity in Iochpe-Maxion?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Iochpe-Maxion’s ratio of 7.25x is trading slightly below its industry peers’ ratio of 11.9x, which means if you buy Iochpe-Maxion today, you’d be paying a reasonable price for it. And if you believe that Iochpe-Maxion should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because Iochpe-Maxion’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Iochpe-Maxion look like?

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. Though in the case of Iochpe-Maxion, it is expected to deliver a relatively unexciting earnings growth of 5.4%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? MYPK3’s future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at MYPK3? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on MYPK3, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Iochpe-Maxion. You can find everything you need to know about Iochpe-Maxion in the latest infographic research report. If you are no longer interested in Iochpe-Maxion, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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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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