At R$16.31, 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 saw a significant share price rise of over 20% in the past couple of months on the BOVESPA. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine Ser Educacional’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Ser Educacional

What is Ser Educacional worth?

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 11.77x is below its peer average of 22.46x, which indicates the stock is trading at a lower price compared to the Consumer Services industry. What’s more interesting is that, Ser Educacional’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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.

Can we expect growth from Ser Educacional?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 -0.4% 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 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 2 warning signs for Ser Educacional you should be aware of.

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. 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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