Why Fras-le S.A. (BVMF:FRAS3) Could Be Worth Watching

Fras-le S.A. (BVMF:FRAS3), might not be a large cap stock, but it saw significant share price movement during recent months on the BOVESPA, rising to highs of R$13.29 and falling to the lows of R$11.38. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Fras-le's current trading price of R$11.47 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Fras-le’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Fras-le

Is Fras-le still cheap?

Good news, investors! Fras-le 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. 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 Fras-le’s ratio of 13.07x is below its peer average of 30.9x, which indicates the stock is trading at a lower price compared to the Auto Components industry. Although, there may be another chance to buy again in the future. This is because Fras-le’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 kind of growth will Fras-le generate?

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. With revenues expected to grow by 45% over the next couple of years, the future seems bright for Fras-le. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? Since FRAS3 is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on FRAS3 for a while, now might be the time to make a leap. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy FRAS3. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 2 warning signs for Fras-le you should know about.

If you are no longer interested in Fras-le, 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. 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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