At R$4.55, Is Cogna Educação S.A. (BVMF:COGN3) Worth Looking At Closely?

While Cogna Educação S.A. (BVMF:COGN3) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the BOVESPA, rising to highs of R$5.98 and falling to the lows of R$4.20. 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 Cogna Educação's current trading price of R$4.55 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 Cogna Educação’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 Cogna Educação

What is Cogna Educação worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 0.83% above my intrinsic value, which means if you buy Cogna Educação today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is R$4.51, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that Cogna Educação’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Cogna Educação 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. 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 grow by 83% over the next year, the near-term future seems bright for Cogna Educação. 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? COGN3’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on COGN3, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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. For example, we've found that Cogna Educação has 3 warning signs (1 shouldn't be ignored!) that deserve your attention before going any further with your analysis.

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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.
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