Should You Think About Buying Iochpe-Maxion S.A. (BVMF:MYPK3) Now?

Iochpe-Maxion S.A. (BVMF:MYPK3), is not the largest company out there, but it received a lot of attention from a substantial price movement on the BOVESPA over the last few months, increasing to R$14.22 at one point, and dropping to the lows of R$10.20. 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 Iochpe-Maxion's current trading price of R$10.20 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Iochpe-Maxion’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Iochpe-Maxion

Is Iochpe-Maxion Still Cheap?

The share price seems sensible at the moment 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 3.01x is currently trading slightly below its industry peers’ ratio of 5.35x, which means if you buy Iochpe-Maxion today, you’d be paying a reasonable price for it. And if you believe Iochpe-Maxion should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. In addition to this, it seems like Iochpe-Maxion’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 kind of growth will Iochpe-Maxion 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 profit expected to grow by a double-digit 15% over the next couple of years, the outlook is positive for Iochpe-Maxion. 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 MYPK3’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 track record of its management team. Have these factors changed since the last time you looked at MYPK3? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on MYPK3, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for MYPK3, 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.

So while earnings quality is important, it's equally important to consider the risks facing Iochpe-Maxion at this point in time. When we did our research, we found 3 warning signs for Iochpe-Maxion (1 makes us a bit uncomfortable!) that we believe deserve your full attention.

If you are no longer interested in Iochpe-Maxion, 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.