Is There Now An Opportunity In Cogna Educação S.A. (BVMF:COGN3)?

Cogna Educação S.A. (BVMF:COGN3), 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. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine Cogna Educação’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Cogna Educação

Is Cogna Educação still cheap?

The stock is currently trading at R$4.46 on the share market, which means it is overvalued by 25% compared to my intrinsic value of R$3.55. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Since Cogna Educação’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 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. 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 100% over the next couple of years, the 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? It seems like the market has well and truly priced in COGN3’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe COGN3 should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 COGN3 for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for COGN3, 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 Cogna Educação at this point in time. While conducting our analysis, we found that Cogna Educação has 1 warning sign and it would be unwise to ignore this.

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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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