At R$29.14, Is Azzas 2154 S.A. (BVMF:AZZA3) Worth Looking At Closely?

Azzas 2154 S.A. (BVMF:AZZA3), 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$47.77 at one point, and dropping to the lows of R$28.83. 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 Azzas 2154's current trading price of R$29.14 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 Azzas 2154’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 Azzas 2154

What Is Azzas 2154 Worth?

Azzas 2154 appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Azzas 2154’s ratio of 11.34x is above its peer average of 7.89x, which suggests the stock is trading at a higher price compared to the Luxury industry. Furthermore, Azzas 2154’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

Can we expect growth from Azzas 2154?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to more than double over the next couple of years, the future seems bright for Azzas 2154. 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? AZZA3’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe AZZA3 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 an eye on AZZA3 for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for AZZA3, which means it’s worth diving deeper into other factors 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 Azzas 2154 at this point in time. When we did our research, we found 2 warning signs for Azzas 2154 (1 makes us a bit uncomfortable!) that we believe deserve your full attention.

If you are no longer interested in Azzas 2154, 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.