Is Cyrela Brazil Realty S.A. Empreendimentos e Participações (BVMF:CYRE3) Potentially Undervalued?

Cyrela Brazil Realty S.A. Empreendimentos e Participações (BVMF:CYRE3), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the BOVESPA. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Cyrela Brazil Realty Empreendimentos e Participações’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Cyrela Brazil Realty Empreendimentos e Participações

What's The Opportunity In Cyrela Brazil Realty Empreendimentos e Participações?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 5.63x is currently trading slightly below its industry peers’ ratio of 6.85x, which means if you buy Cyrela Brazil Realty Empreendimentos e Participações today, you’d be paying a decent price for it. And if you believe Cyrela Brazil Realty Empreendimentos e Participações 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. Is there another opportunity to buy low in the future? Since Cyrela Brazil Realty Empreendimentos e Participações’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 Cyrela Brazil Realty Empreendimentos e Participações 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. Cyrela Brazil Realty Empreendimentos e Participações' earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in CYRE3’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 financial strength of the company. Have these factors changed since the last time you looked at CYRE3? 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 CYRE3, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for CYRE3, which means it’s worth diving deeper into 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 Cyrela Brazil Realty Empreendimentos e Participações at this point in time. While conducting our analysis, we found that Cyrela Brazil Realty Empreendimentos e Participações has 2 warning signs and it would be unwise to ignore these.

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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.