At R$32.10, Is MAHLE Metal Leve S.A. (BVMF:LEVE3) Worth Looking At Closely?

MAHLE Metal Leve S.A. (BVMF:LEVE3), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the BOVESPA over the last few months. 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 examine MAHLE Metal Leve’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for MAHLE Metal Leve

Is MAHLE Metal Leve Still Cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 12.21% above my intrinsic value, which means if you buy MAHLE Metal Leve today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth R$28.61, there’s only an insignificant downside when the price falls to its real value. In addition to this, MAHLE Metal Leve has a low beta, which suggests its share price is less volatile than the wider market.

Can we expect growth from MAHLE Metal Leve?

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 MAHLE Metal Leve, it is expected to deliver a negative earnings growth of -1.5%, 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? Currently, LEVE3 appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on LEVE3 for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on LEVE3 should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing MAHLE Metal Leve at this point in time. In terms of investment risks, we've identified 1 warning sign with MAHLE Metal Leve, and understanding it should be part of your investment process.

If you are no longer interested in MAHLE Metal Leve, 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.