At R$11.62, Is It Time To Put Ser Educacional S.A. (BVMF:SEER3) On Your Watch List?

While Ser Educacional S.A. (BVMF:SEER3) might not be the most widely known stock at the moment, 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. However, what if the stock is still a bargain? Let’s take a look at Ser Educacional’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Ser Educacional

What's the opportunity in Ser Educacional?

Great news for investors – Ser Educacional 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. 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 Ser Educacional’s ratio of 8.77x is below its peer average of 18.1x, which indicates the stock is trading at a lower price compared to the Consumer Services industry. However, given that Ser Educacional’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 Ser Educacional 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. 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. However, with a negative profit growth of -19% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Ser Educacional. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although SEER3 is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to SEER3, 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 SEER3 for some time, but hesitant on making the leap, I recommend you dig deeper 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.

So while earnings quality is important, it's equally important to consider the risks facing Ser Educacional at this point in time. In terms of investment risks, we've identified 1 warning sign with Ser Educacional, and understanding this should be part of your investment process.

If you are no longer interested in Ser Educacional, 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.