Why Cyrela Brazil Realty S.A. Empreendimentos e Participações (BVMF:CYRE3) Could Be Worth Watching

Cyrela Brazil Realty S.A. Empreendimentos e Participações (BVMF:CYRE3), is not the largest company out there, but it led the BOVESPA gainers with a relatively large price hike in the past couple of weeks. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? 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.

Our analysis indicates that CYRE3 is potentially undervalued!

What Is Cyrela Brazil Realty Empreendimentos e Participações Worth?

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. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Cyrela Brazil Realty Empreendimentos e Participações’s ratio of 8.55x is trading slightly below its industry peers’ ratio of 10.25x, which means if you buy Cyrela Brazil Realty Empreendimentos e Participações today, you’d be paying a reasonable 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. Although, there may be an opportunity to buy in the future. This is because Cyrela Brazil Realty Empreendimentos e Participações’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Cyrela Brazil Realty Empreendimentos e Participações look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 over the next few years are expected to increase by 41%, indicating a highly optimistic future ahead. This should lead to more 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 track record of its management team. Have these factors changed since the last time you looked at CYRE3? Will you have enough conviction to buy should the price fluctuate 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 advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for CYRE3, 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 2 warning signs for Cyrela Brazil Realty Empreendimentos e Participações you should be aware of.

If you are no longer interested in Cyrela Brazil Realty Empreendimentos e Participações, 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.