Should You Think About Buying Compagnie d'Entreprises CFE SA (EBR:CFEB) Now?

While Compagnie d'Entreprises CFE SA (EBR:CFEB) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the ENXTBR. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Compagnie d'Entreprises CFE’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Our analysis indicates that CFEB is potentially undervalued!

What's The Opportunity In Compagnie d'Entreprises CFE?

Good news, investors! Compagnie d'Entreprises CFE is still a bargain right now according to my price multiple model, which compares 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 5.51x is currently well-below the industry average of 10.69x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Compagnie d'Entreprises CFE’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Compagnie d'Entreprises CFE?

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 Compagnie d'Entreprises CFE, it is expected to deliver a negative earnings growth of -9.6%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Although CFEB is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to CFEB, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on CFEB for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To that end, you should learn about the 2 warning signs we've spotted with Compagnie d'Entreprises CFE (including 1 which shouldn't be ignored).

If you are no longer interested in Compagnie d'Entreprises CFE, you can use our free platform to see our 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. 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.