Should You Investigate MAHLE Metal Leve S.A. (BVMF:LEVE3) At R$25.18?

While MAHLE Metal Leve S.A. (BVMF:LEVE3) 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 BOVESPA. 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 take a look at MAHLE Metal Leve’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for MAHLE Metal Leve

What Is MAHLE Metal Leve Worth?

According to my valuation model, MAHLE Metal Leve seems to be fairly priced at around 7.1% below my intrinsic value, which means if you buy MAHLE Metal Leve today, you’d be paying a fair price for it. And if you believe the company’s true value is R$27.09, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that MAHLE Metal Leve’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

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 -17%, 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 beneficial 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 tabs 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. In addition to this, 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 2 warning signs for MAHLE Metal Leve you should know about.

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.