Why MAHLE Metal Leve S.A. (BVMF:LEVE3) Could Be Worth Watching

MAHLE Metal Leve S.A. (BVMF:LEVE3), is not the largest company out there, but it saw a decent share price growth in the teens level on the BOVESPA over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine MAHLE Metal Leve’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for MAHLE Metal Leve

Is MAHLE Metal Leve Still Cheap?

Good news, investors! MAHLE Metal Leve 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. 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 8.97x is currently well-below the industry average of 18.53x, meaning that it is trading at a cheaper price relative to its peers. Another thing to keep in mind is that MAHLE Metal Leve’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

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. Though in the case of MAHLE Metal Leve, it is expected to deliver a negative earnings growth of -15%, 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? Although LEVE3 is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about 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.

So while earnings quality is important, it's equally important to consider the risks facing MAHLE Metal Leve at this point in time. 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.