Is Now An Opportune Moment To Examine Companhia Brasileira de Distribuição (BVMF:PCAR3)?

While Companhia Brasileira de Distribuição (BVMF:PCAR3) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the BOVESPA. With many analysts covering the mid-cap 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 Companhia Brasileira de Distribuição’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Companhia Brasileira de Distribuição

Is Companhia Brasileira de Distribuição still cheap?

Great news for investors – Companhia Brasileira de Distribuição is still trading at a fairly cheap price 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 7.46x is currently well-below the industry average of 22.42x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Companhia Brasileira de Distribuição’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Companhia Brasileira de Distribuição 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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Companhia Brasileira de Distribuição, at least in the near future.

What this means for you:

Are you a shareholder? Although PCAR3 is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to PCAR3, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on PCAR3 for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you'd like to know more about Companhia Brasileira de Distribuição as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 5 warning signs for Companhia Brasileira de Distribuição you should be mindful of and 2 of these don't sit too well with us.

If you are no longer interested in Companhia Brasileira de Distribuição, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

When trading stocks or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.