Is There Now An Opportunity In Vivara Participações S.A. (BVMF:VIVA3)?

While Vivara Participações S.A. (BVMF:VIVA3) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the BOVESPA over the last few months, increasing to R$35.61 at one point, and dropping to the lows of R$30.31. 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 Vivara Participações' current trading price of R$30.72 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 Vivara Participações’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Vivara Participações

What's The Opportunity In Vivara Participações?

Vivara Participações 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 Vivara Participações’s ratio of 18.87x is above its peer average of 10.22x, which suggests the stock is trading at a higher price compared to the Luxury industry. But, is there another opportunity to buy low in the future? Given that Vivara Participações’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Vivara Participações look like?

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 80% over the next couple of years, the future seems bright for Vivara Participações. 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 VIVA3’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe VIVA3 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 tabs on VIVA3 for some time, 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 VIVA3, 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 Vivara Participações at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Vivara Participações.

If you are no longer interested in Vivara 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.