Should You Investigate MAHLE Metal Leve S.A. (BVMF:LEVE3) At R$20.29?

While MAHLE Metal Leve S.A. (BVMF:LEVE3) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the BOVESPA over the last few months. 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? Today I will analyse the most recent data on MAHLE Metal Leve’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for MAHLE Metal Leve

What's the opportunity in MAHLE Metal Leve?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 28.98x is currently trading slightly below its industry peers’ ratio of 29.32x, which means if you buy MAHLE Metal Leve today, you’d be paying a reasonable price for it. And if you believe that MAHLE Metal Leve should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. In addition to this, it seems like MAHLE Metal Leve’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of MAHLE Metal Leve look like?

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. With profit expected to more than double over the next couple of years, the future seems bright for MAHLE Metal Leve. 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? It seems like the market has already priced in LEVE3’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at LEVE3? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on LEVE3, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for LEVE3, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

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. Every company has risks, and we've spotted 4 warning signs for MAHLE Metal Leve you should know about.

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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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