Is MAHLE Metal Leve S.A. (BVMF:LEVE3) Potentially Undervalued?

MAHLE Metal Leve S.A. (BVMF:LEVE3), might not be a large cap stock, but it led the BOVESPA gainers with a relatively large price hike in the past couple of weeks. As a small cap stock, hardly covered by any analysts, 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

What Is MAHLE Metal Leve Worth?

Great news for investors – MAHLE Metal Leve is still trading at a fairly cheap price 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 9.04x is currently well-below the industry average of 20.55x, meaning that it is trading at a cheaper price relative to its peers. MAHLE Metal Leve’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What does the future of MAHLE Metal Leve 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. However, with a negative profit growth of -11% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for MAHLE Metal Leve. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although LEVE3 is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to LEVE3, 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 tabs on LEVE3 for some time, but hesitant on making the leap, I recommend you research further 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.

If you'd like to know more about MAHLE Metal Leve as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for MAHLE Metal Leve you should be mindful of and 1 of these is significant.

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.