Is It Time To Consider Buying Embraer S.A. (BVMF:EMBR3)?

While Embraer S.A. (BVMF:EMBR3) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the BOVESPA over the last few months, increasing to R$19.98 at one point, and dropping to the lows of R$16.67. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Embraer's current trading price of R$17.47 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Embraer’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Embraer

Is Embraer Still Cheap?

Embraer appears to be overvalued by 26% at the moment, based on my discounted cash flow valuation. The stock is currently priced at R$17.47 on the market compared to my intrinsic value of R$13.89. This means that the opportunity to buy Embraer at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Embraer’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Embraer generate?

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 revenues expected to grow by a double-digit 24% over the next couple of years, the outlook is positive for Embraer. If the level of expenses is able to be maintained, 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 well and truly priced in EMBR3’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe EMBR3 should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on EMBR3 for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for EMBR3, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Diving deeper into the forecasts for Embraer mentioned earlier will help you understand how analysts view the stock going forward. Luckily, you can check out what analysts are forecasting by clicking here.

If you are no longer interested in Embraer, 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.