What Is Companhia de Saneamento de Minas Gerais's (BVMF:CSMG3) Share Price Doing?

Companhia de Saneamento de Minas Gerais (BVMF:CSMG3), which is in the water utilities business, and is based in Brazil, led the BOVESPA gainers with a relatively large price hike in the past couple of weeks. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Companhia de Saneamento de Minas Gerais’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Companhia de Saneamento de Minas Gerais

Is Companhia de Saneamento de Minas Gerais still cheap?

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. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 10.33x is currently trading slightly below its industry peers’ ratio of 12.21x, which means if you buy Companhia de Saneamento de Minas Gerais today, you’d be paying a reasonable price for it. And if you believe Companhia de Saneamento de Minas Gerais should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like Companhia de Saneamento de Minas Gerais’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Companhia de Saneamento de Minas Gerais generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 Companhia de Saneamento de Minas Gerais, it is expected to deliver a relatively unexciting earnings growth of 0.7%, 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? CSMG3’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 track record of its management team. Have these factors changed since the last time you looked at CSMG3? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on CSMG3, now may not be the most optimal 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 Companhia de Saneamento de Minas Gerais. You can find everything you need to know about Companhia de Saneamento de Minas Gerais in the latest infographic research report. If you are no longer interested in Companhia de Saneamento de Minas Gerais, 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. Thank you for reading.